Dream Global REIT (TSX:DRG.UN) is unique among Canadian REITs. It owns office property abroad, mostly in Germany, and a little in Austria. Altogether, it owns 13.2 million square feet spread out among 197 different buildings concentrated in Germany’s largest centres.
When Dream Global first became publicly traded back in 2011, much of its rental revenue was dependent on Deutsche Post, its largest tenant. Through a series of acquisitions and Deutsche Post vacating some space, now only 22% of revenue comes from the postal giant.
Germany is one of the strongest economies in the European Union, which is allowing Dream Global to both fill vacancies and increase rent. Since the beginning of 2015, it has raised total occupancy from 86% to more than 88%.
Dream has been snatching up assets steadily over the past few years, with low mortgage rates making acquisitions appealing. At the 2011 IPO, the company had a net asset value of $351 million. It was $1.3 billion at the end of its latest quarter. Funds from operations also grew nicely, increasing from $43 million annualized to $92 million.
Dream Global pays a 9.1% yield, one of the most generous dividends you’ll find. While the payout ratio of approximately 100% looks bad on the surface, many of Dream’s investors take advantage of its dividend reinvestment program, which offers a 4% discount for investors who take their dividends in the form of new shares.
Thus, Dream Global’s cash payout ratio is closer to 70%, which is much more secure.
