Sunday, 29 November 2015

Recent Buy! November 2015

    This post is actually a fair bit late, as I had made this purchase on November 12th. I have just been rather busy lately, in part to my new job! So that had me pretty busy and tired by the end of the day. I had also meant to not make any buys till I put together and posted a Watchlist. However, I thought I saw a good opportunity and I went for it. 

    I went ahead and purchased 45 additional shares in Dream REIT (TSE:D.UN) which is one of my current holdings. The company has had a rough go this year, even though its Q2 financial report was pretty good, posting some solid results as said by the company. Still though, Dream REIT is down 27.63% YTD, with a current dividend yield of a 12.3%!

    I bought the shares just ahead of their Q3 financial results posting and after the share price had dropped during the day by around 6%, and seeing as how it had done pretty well in the previous report I was expecting more of the same. The company also has above industry average occupancy, and has done a good job at re-securing leases on its rentals.

    So, I picked up the 45 shares for $19.30, with a dividend yield of 11.6%, adding an awesome $8.40 a month in dividends and $100.80 annually. So, some great firepower to add to my monthly buys and overall dividend income. The purchase also put my total shares in Dream to 164 and lowered my average cost basis of of shares from $27.56 to $25.29. Dream now represents a 10% position in my portfolio, with REITs account for 17%.

    Since reporting its Q3 results Dream dropped from about the price where I bought it at $19.30 to its current $18.20. Which is of course unfortunate for me as someone buying it just before a drop, however in this case I believe the market over reacted to the slightly below expectation results that Dream delivered.

    The main concern which I believe brought about the price drop was that the funds from operations (FFO) was reduced to $.70 from $.73 in the previous three month comparison points. While certainly having a lower FFO is never a good thing for a company, especially a REIT where FFO is required to pay out dividends, considering the energy slowdown impacting tenants, DREAM has done well to keep its tenants. Dream also has many other attributes that I believe will keep it strong going forward.

Here are some highlights:
This is a link to the financial report on Dreams site, in PDF.

- Commitments to renew 53% of leases that are coming up in 2016.

- Managed to renew and refinance mortgages at lower rates for $118.4 million in debt, with a reduction in 1.25% of overall interest costs.

- Share buy back and cancellation of 1,220,900 REIT A units in the past three months ending in September, totaling 3,283,100 units bought and cancelled from the start of the year!

- Dream has in-place and committed occupancy above 90%, although slightly declined from the previous quarter. And lease commitments are lower than average in the Calgary and Edmonton Alberta areas due to the slow down in the energy industry due to lower oil prices. With only 44% of leases committed for 2016.
    Overall, I think management is doing quite well, actively working to lower costs through restructuring debt. As well as using its extra cash to buy back and cancel stock. Just think, all those cancelled stock units equate to $612,955 a month in freed up cash flow!

   Now, the only concern I have is how the market will react to any upcoming interest rate changes in Canada and the United States. Normally, a REIT will react with a share price drop as its costs of doing business will increase, as they generally rely on debt to make accusations. However, with already rock bottom rates, and many REITs having their debt locked up on low rates, perhaps it wont act that way. For me though, I feel pretty assured that Dream will keep its dividends coming for some time, so I am happy to keep using those hefty dividend payments every month to fuel my other buys. Not to mention since the shares are in my Tax Free Savings Account, its pure income with none given back to the Government!


  1. Hi - just curious about a couple of things. Personally, 10 % in one holding is a bit too much for me - I usually like to keep any one position to 5% of my total. Have you thought about Dream Global at all just to get some international diversity. I also hold Dream, but chose to pick up Dream Global as a second investment in order to diversify geographically. Wondering what your thoughts are on that. Take care.

    1. Thanks for commenting!

      Normally I would agree with you, that having any one position at such a high concentration is probably not ideal. However, I have only been building my portfolio for about two years now, and on a low wage and so in order to cut down on trading costs I do larger buys as I can afford them. Longer term, the holdings within my TFSA, my current investment vehicle of choice has contribution limits, meaning that all investments within it will only be so large and once capped I will probably start a DRIP for them, so I will need them to pay dividends to at least buy 1 share. Here is my post on how I am using it: So, in the future when I branch out to RRSP's and non-registered accounts that is when I plan to diversify further. Most likely, RRSP will be US companies and non-registered will be international, Cdn, US, etc. Hope that helped to answer your question.