CT REIT: New Distribution Hike Pushes Yield To 6.7% At 74% Payout Ratio

Core Viewpoint - CT REIT is positioned to manage potential increases in interest expenses due to its strong relationship with its main tenant, Canadian Tire, and its conservative distribution payout ratio, which allows for growth and stability in earnings [2][4][8]. Financial Performance - The Net Operating Income (NOI) for Q1 2024 increased by 5.6%, rising from C$107.4 million to C$113.5 million [9][13]. - Funds from Operations (FFO) increased by 3.8% to C$78.2 million, while Adjusted Funds from Operations (AFFO) rose by 4.9% to C$72.6 million [13][14]. - The annualized AFFO per share is projected to be C$1.25, reflecting a 4% increase compared to the previous year [17]. Debt Management - The average cost of debt is currently around 4.07%, with a significant portion of fixed-rate debt that will help mitigate the impact of rising interest rates [22]. - The company has a total of C$1.45 billion in Class C LP Units with a weighted average cost of debt of 4.41% [18][19]. - C$1.43 billion in debentures have a weighted average interest rate of 3.73%, with some lower-rate debentures not needing refinancing until 2029 and 2031 [20][21]. Distribution Strategy - CT REIT announced a 3% increase in its monthly distribution to C$0.0771 per unit, resulting in an annualized distribution of C$0.9252 per share, which corresponds to a yield of 6.68% [3][4]. - The payout ratio is approximately 74% based on AFFO expectations, indicating a balanced approach to shareholder returns and growth investments [3][4]. Tenant Relationship - The strong relationship with Canadian Tire, which is both the largest tenant and shareholder, contributes positively to occupancy rates and overall stability [7][8]. - The REIT's governance structure ensures that lease contracts are fair and beneficial for both the REIT and its main tenant, mitigating potential conflicts of interest [8].