Any time a security approaches a double-digit dividend yield, serious long-term fundamental investors often step away.
Financial markets are very good at weeding out companies with unsustainably high dividend distributions; in many cases, for companies with higher than average yields that continue to increase (typically as a result of negative stock price action, in addition to dividend increases), investors can expect a dividend cut and therefore price such a cut into a company's share price.
In the case of Pro Real Estate Investment Trust (TSX:PRV.UN), the company's 9.6% yield appears to be moderately safe, at least in the short term. The real estate investment trust (REIT) has built a nice portfolio of commercial properties in Canada with an occupancy rate of close to 100%.
Though based in Montreal, this REIT has established a well-diversified portfolio of properties in relatively desirable areas with relatively low-risk tenants (those who are expected to stay for the long term and accept annual price increases along the way).
Pro REIT has recently acquired a number of properties in Eastern Canada and expect revenues from these acquisitions to allow for increased cash flow, making the company's distribution (which it has held steady since 2014) appear more viable to naysayers who have eschewed an investment in Pro REIT in favor of other options.
Pro REIT is a smaller cap, higher risk option for aggressive investors seeking yield today.
Invest wisely, my friends.
