Tag Archives: TSX:DRG.UN

Should You Get an 8.5% Yield from this REIT?

Dream Global operates primarily in the core office markets in Germany. Are Germany’s economy and related markets growing or shrinking? How sustainable is its 8.5% yield? Does it have any price-appreciation potential at the current price?

If you are an income investor, you may be attracted by Dream Global REIT’s (TSX:DRG.UN) compelling yield of 8.5%.

But not so fast. There must be a catch…right? Let’s study its business before deciding if we’re a buyer or not.

What’s Dream Global about?

Dream Global owns and operates office and mixed-use properties in Europe. The REIT has interests in 197 properties across 13.2 million square feet.

Primarily, it focuses on the seven major office markets in Germany in the cities of Hamburg, Dusseldorf, Cologne, Frankfurt, Stuttgart, Munich, and Berlin. It has 75% of its gross asset value in these markets. And it has 17% of its assets in Hannover, Nuremberg, and Vienna, Austria.

Improving fundamentals

Since Q2 2015, the REIT has reduced its property count from 221 to 197 while incrementally improving its funds from operations, occupancy rate, and average in-place net rent per square feet.

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My Rental Income from 7 Canadian REITs

Many people like to receive rent from properties. On the other hand, I don’t want to manage properties or spend time keeping good relationships with tenants. Instead, I like to sit back and receive passive rental income from my Canadian REITs.

My Canadian REIT portfolio of 7 companies that make up roughly 12% of my dividend portfolio. Yet, they contribute close to 22% of my portfolio income.

I first go over my highest yielding Canadian REITs that offer income of 9% or higher. Then, I talk about the less risky REITs with yields of 4-6%.

By analyzing my Canadian REIT income portfolio, we can probably learn something. Here it goes!

REITs Provide Good Income

The first thing to note is that my Canadian REIT portfolio generates 22% of the income in my dividend portfolio even though it only makes up 12% of my portfolio value. That seems to indicate that distributions is a major part of REIT returns.

Well, it’s true that many REITs, including 4 of my REIT holdings yield 9% or higher right now.

Canadian REIT Portfolio Allocation

I analyzed my REIT portfolio in terms of their allocation according to market value, as well as income allocation. And I will talk about each Canadian REIT later on in the article as well.

My Canadian REIT allocation by value and by income

Source: Author

You’d notice that 28% of my Canadian REIT portfolio is Plaza Retail REIT (TSX:PLZ.UN), and it also contributes to 22% of my Canadian REIT income. I’m comfortable with the concentration in Plaza Retail REIT because of its track record and growth potential.

Northview Apartment also has a good track record of maintain distributions. However, its properties are mostly located in resource provinces. So, it is a good income play, but should only be bought when its yielding around 9% at historical highs.

The other Canadian REITs add diversification to the REIT income stream. Looking at the industry or asset class allocation, it looks pretty balanced with residential REITs making up almost one-third of the pie. That’s fine because everyone needs to live somewhere. If you’re not buying, you’re renting. Read More