Advertisement
Canada markets closed
  • S&P/TSX

    21,639.10
    -59.00 (-0.27%)
     
  • S&P 500

    5,431.60
    -2.14 (-0.04%)
     
  • DOW

    38,589.16
    -57.94 (-0.15%)
     
  • CAD/USD

    0.7281
    +0.0001 (+0.02%)
     
  • CRUDE OIL

    78.49
    -0.13 (-0.17%)
     
  • Bitcoin CAD

    91,574.10
    +653.41 (+0.72%)
     
  • CMC Crypto 200

    1,383.00
    -34.87 (-2.46%)
     
  • GOLD FUTURES

    2,348.40
    +30.40 (+1.31%)
     
  • RUSSELL 2000

    2,006.16
    -32.75 (-1.61%)
     
  • 10-Yr Bond

    4.2130
    -0.0250 (-0.59%)
     
  • NASDAQ

    17,688.88
    +21.28 (+0.12%)
     
  • VOLATILITY

    12.66
    +0.72 (+6.03%)
     
  • FTSE

    8,146.86
    -16.81 (-0.21%)
     
  • NIKKEI 225

    38,814.56
    +94.06 (+0.24%)
     
  • CAD/EUR

    0.6798
    +0.0024 (+0.35%)
     

1 Magnificent TSX Dividend Stock Down 9% to Buy and Hold Forever

Cogs turning against each other
Image source: Getty Images.

Written by Christopher Liew, CFA at The Motley Fool Canada

The current high interest rates are negatively impacting the real estate market. Many in the sector hope for rate cuts soon to spur activity. Industry experts believe that real estate investment trusts (REITs) will benefit from the easing of monetary policy. While real estate is the second worst-performing sector (-3.8%) thus far in 2024, you can find excellent buying opportunities.

One magnificent investment option in May is Nexus Industrial (TSX:NXR.UN). The REIT is down 9% year to date, although the over-the-top 8.6% dividend yield is hard to ignore. At $7.16 per share, you get the best bang for your buck. Moreover, this TSX dividend stock is for keeps if you desire pension-like monthly dividends.

Return to balance

The global forecast for the REIT industry is encouraging. According to Finextra, recent market reports predict the market size will grow to US$4.2 trillion by 2027. The e-commerce boom increased the demand for industrial and logistics properties. Nexus Industrial belongs in this real estate sub-sector.

ADVERTISEMENT

The $493.3 million REIT was originally named Nexus Real Estate Investment Trust. However, after a very active year in 2021, management decided to change the name to Nexus Industrial REIT. Its CEO, Kelly Hanczyk, said the goal to become Canada’s next pure-play industrial REIT prompted the change in corporate name.

While this year looks to have a mix of opportunities and challenges, the industrial sector would be the first to return to balance as rental growth normalizes, according to CBRE Research. An economic rebound in the second half of 2024 should stretch to 2025.

Furthermore, expect an economic recovery to reignite industrial leasing momentum and drive future growth in a more balanced market.

Solid start to 2024

Nexus had a solid start to 2024, as evidenced by the financial results in Q1 2024. In the three months ending March 31, 2024, property revenues and net operating income (NOI) increased 11% and 14.8% to $41.6 million and $29.5 million versus Q1 2024, respectively. Net income soared 1,074.9% year over year to $43.7 million.

“This quarter we continued to make progress as a Canada-focused pure-play industrial REIT,” said Hanczyk. At the quarter’s end, the occupancy rate (in-place and committed) was 96%, while the weighted average lease term (WALT) was 6.8 years. The total spending for development projects during the quarter reached $17.8 million.

Regarding the total portfolio, 75.2% of 88 of the 117 income-producing assets are industrial properties. Also, many of Nexus’ industrial leases contain contractual rent increases throughout their terms.

Positive rental fundamentals

The current stock price is within the normal historical range, so the year-to-date loss isn’t a cause for concern. Because of positive rental fundamentals in the industrial sub-sector, Nexus is a lucrative choice for yield-hungry investors.

When its four development projects are complete, management expects an annual stabilized NOI of over $10 million. Expanding to other jurisdictions, particularly in select U.S. markets, is a strong possibility. The monthly dividend payments should be sustainable, considering the low 27.4% payout ratio.

The post 1 Magnificent TSX Dividend Stock Down 9% to Buy and Hold Forever appeared first on The Motley Fool Canada.

Should you invest $1,000 in Nexus Industrial Reit right now?

Before you buy stock in Nexus Industrial Reit, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nexus Industrial Reit wasn’t one of them. The 10 stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $18,271.97!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 32 percentage points since 2013*.

See the 10 stocks * Returns as of 5/21/24

More reading

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Nexus Industrial REIT. The Motley Fool has a disclosure policy.

2024