BTB Real Estate Investment Trust: Little-Known 8.5% Yielder Pays Investors Monthly
A High-Yield Stock You Likely Haven’t Considered
It’s no secret that income investors like real estate stocks, particularly real estate investment trusts (REITs). But even if you follow the real estate industry, chances are you’ve never heard about this REIT: BTB Real Estate Investment Trust (TSE:BTB.UN, OTCMKTS:BTBIF).
BTB REIT is headquartered in Montreal, QC, Canada. It has a portfolio of 64 retail, office, and industrial properties, with a total leasable area of approximately 5.3 million square feet. (Source: “About,” BTB Real Estate Investment Trust, last accessed February 1, 2020.)
Because the company is listed on the Toronto Stock Exchange, it doesn’t get much attention from the U.S. financial media. However, BTB Real Estate Investment Trust stock also trades over the counter in the U.S., so American investors can still buy and sell its shares.
There’s an obvious reason why income investors might want to consider this foreign real estate stock. BTBIF stock pays a cash distribution of CA$0.025 per unit every month, which, at its current stock price, translates to an annual yield of 8.5%.
In other words, what we’re looking at is a high-yield, monthly dividend stock—which is somewhat of a rare find in today’s low-yield environment.
Of course, because the payments are in Canadian dollars, U.S. investors should take exchange-rate fluctuations into consideration.
Now, here’s the most important question every income investor should ask when looking at a REIT these days: How much rent is the company collecting from tenants?
The COVID-19 pandemic has sent shock waves across the world economy. In many sectors, businesses either closed down or experienced substantial declines during the past year. As a result, not all businesses can come up with rent. Since many REITs are commercial landlords, collecting rent from tenants can be a challenge.
The good news is that, even though the pandemic has indeed impacted some of BTB Real Estate Investment Trust’s tenants, the REIT has managed to achieve very strong rent collection figures.
For March 2020, BTB REIT collected 96% of its contractual rent. For April 2020—a period in which the impact from the lockdowns was most pronounced—the rent collection dipped to 92%. But things quickly improved for the REIT; it collected 100% of its contractual rent for May. And according to the company’s latest investor presentation, its rent collection stayed at 100% from May to September 2020. (Source: “Q3 2020 Conference Call Presentation,” BTB Real Estate Investment Trust, November 10, 2020.)
I should point out that, in May 2020, the company announced a reduction in its monthly distribution rate from CA$0.035 per unit to the current CA$0.025 per unit. That was not an uncommon decision in the real estate sector at the time. Also, because of the lower distribution level, BTB REIT now has the ability to substantially outearn its payout.
In the third quarter of last year, the REIT generated CA$23.6 million in revenue, which was down by just 1.6% year-over-year. Its net operating income came in at CA$13.3 million, which, just like revenue, represented a modest decline of 1.3% from a year earlier. (Source: “BTB Demonstrates the Resiliency of its Portfolio and Operating Strategy for a Second Consecutive Quarter,” BTB Real Estate Investment Trust, November 10, 2020.)
Of course, when it comes to a REIT’s dividend safety, the most important number to look at is its funds from operations (FFO). In the third quarter of 2020, BTB REIT generated adjusted FFO of CA$0.097 per unit, which was unchanged from the same period a year earlier.
Considering that BTB Real Estate Investment Trust paid three monthly dividends totaling CA$0.075 per unit for the third quarter of 2020, its adjusted FFO payout ratio was 77%.
In other words, the company had a considerable margin of safety in its dividend policy.
In the third-quarter earnings conference call, BTB REIT’s president and chief executive officer, Michel Léonard, said, “The payout ratio is right now at the expected level following the adjustment of the distribution announced in May of this year and the book value of BTB right now is at CAD5.41.” (Source: “BTB Real Estate Investment Trust (BTBIF) CEO Michel Léonard on Q3 2020 Results – Earnings Call Transcript,” Seeking Alpha, November 10, 2020.)
As of September 30, 2020, the REIT’s portfolio occupancy rate was 92.1%.
Bottom Line on BTB Real Estate Investment Trust
Keep in mind that the COVID-19 pandemic is not over yet, and its economic impacts could persist for a while. Also, vaccine deliveries in Canada have been delayed, and further lockdowns are not out of the question. In other words, BTB Real Estate Investment Trust could continue facing uncertainty.
Still, with a generous yield and a very strong payout coverage, BTB Real Estate Investment Trust stock deserves the attention of investors in the quest for monthly dividends.