[grbgmn]

I invested in DIR.UN Dream Industrial just as a one off in my portfolio mainly for the dividends. The kicker is I bought at the most recent height of the stock, and it has now dropped 23% from my purchase price. All my investments are long term so my plan is to ride it out, but I would love to hear some folks opinions on this particular REIT. Thanks!

 

[Beaver101]

^ Don't own DIR.UN but do SMU.UN another industrial REIT which looks okay. Mind you the markets had dropped the past couple of days so -23% isn't too bad. Anyhow, might want to take a look under the hood of DIR.UN to see what's there that's causing that (severe?) drop.

 

[grbgmn]

The performance of SMU.UN is similar to DIR.UN. It looks bad right now on my end because I lump sum bought at the height of the stock price a few months ago. If I would have bought SMU instead the result would have been the same.

 

[AltaRed]

I can only think that investors have sold these REITs down because better yields can be found elsewhere. REITs are mostly a yield play for income investors.

Edit: spelling

 

[londoncalling]

If nothing has fundamentally changed with the company or in your reason for owning there is no reason to sell. In fact it may be time to buy if it fits your allocation and strategy. I agree with Alta that many income investors are moving to lower risk fixed income.

 

[zinfit]

If nothing has fundamentally changed with the company or in your reason for owning there is no reason to sell. In fact it may be time to buy if it fits your allocation and strategy. I agree with Alta that many income investors are moving to lower risk fixed income.

yes you can get GICs at 4.5% . Very competitive with Reits with a lot less risk. I suspect that one can find bonds with plus 5% yields. If this Reit has declined 23% its yield must be in the 6% or higher level?

 

[londoncalling]

Dream is nearing 6% at 5.71% which is a fair premium for the additional risk. Oddly, Summit is paying less than 3.5%. I expect REITs to be squeezed a bit during the rate increases but their assets will appreciate in time.

 

[Beaver101]

The performance of SMU.UN is similar to DIR.UN. It looks bad right now on my end because I lump sum bought at the height of the stock price a few months ago. If I would have bought SMU instead the result would have been the same.

... then just hang on even though I think there're differences. Primarily locations. I can't recall specifically as I bought SMU.UN awhile ago (aka a few years) and my objective then for the REIT was to DRIP the divvies and watch it grow (aka appreciate) - eventually. It did (with the pandemic boosting it) and I believe it will given "future" needs. I'm primarily a buy and holder.

 

[Covariance]

Not all REITs are the same, and some sectors better than others. While Real Estate values are sensitive to interest rates, they also have the potential to grow cashflow and earnings (unlike "fixed income" - bonds). So we want REITs that can grow cashflow during inflationary periods. And maintain, grow property values. IE grow rents with inflation.

I don't know your company here but if I did I would focus on whether they can grow rents, and if their property values are going to hold up.

 

[MrsPartridge]

When you compare the chart of Dir.un to say, the Dow or the S&P 500, you'll see that the patterns match up. So for me this says it's not Dream that's an issue but just the whole market is moving downward together. If you're reinvesting that monthly yield then you're getting some good returns now and it'll pay off when the market goes up later on.

5 year comparison

 

[TomB16]

If you're reinvesting that monthly yield then you're getting some good returns now and it'll pay off when the market goes up later on.

This is how an investor thinks.


This is a price correction. While it's not great, it could be substantially worse.

 

[Beaver101]

This is how an investor thinks.


This is a price correction. While it's not great, it could be substantially worse.

.. this is where the DRIPping comes in handy without having to continuously monitor the price. Mind you it's dribs and drabs, not chunks.

Oops, no DRIPping on SMU.UN ... but on PLZ.UN (not industrial though).

 

[grbgmn]

I appreciate all the feedback. I was initially a little startled by the drastic drop in this particular fund due to having bought at the peak, but this discussion has helped put things into perspective.

 

[MrMatt]

Now do I want a REIT or MSFT

 

[Ponderling]

The other part of reits that depress prices is how indebted they are.

Home owners are not the only ones getting squeezed in a rising interest rate environment.

If they cannot fully lease because tenant company failures as the economy as a whole might contract;.
Or if leasing revenues don't climb with inflation;
Then the divvy pay gets squeezed due to rising mortgage repayment costs.

So a complex time to be a REIT, which is what has the pressure on their prices at the moment.

Oh, and cut the divy to get some operating cash flow to service larger debt costs and watch the share price plummet

 

[Ponderling]

So what I perceive as the 'on sale' price tipped the scale and I added this to our more than half a dozen other reit plays we hold, mostly in dear wife's rrsp.

 

[james4beach]

yes you can get GICs at 4.5% . Very competitive with Reits with a lot less risk. I suspect that one can find bonds with plus 5% yields. If this Reit has declined 23% its yield must be in the 6% or higher level?

Yeah, I think these different assets compete for yield.

As you mentioned, GICs are at 4.5%- 4.6% today for Big Five banks. Short term corporate bonds (XSH) are exactly the same, 4.6% yield.

Corporate bonds (XCB) yield 4.9% with pretty low default risk. XCB is safer than a REIT index.

Low grade bonds get more interesting. XHB (borderline junk bonds) yields 5.6% which is pretty amazing. Yes these are risky but probably still safer than a REIT index. So when an investor considers buying REITs for yield, they have to consider these other alternatives, like very safe bonds at 4.6% or riskier bonds at 5.6%