Image source: Getty Images
Those looking for monthly passive income from real estate investment trusts (REITs) may have been disappointed with the recent earnings report of Allied properties (TSX:AP.UN). The company reported results that were in line with estimates, but analysts now fear the immediate future of the company's results.
That said, this could also be a good time to consider stocks as a long-term investment, especially if you hope to increase monthly passive income. So let's look at what investors should consider with this stock.
Recent news
There have been some announcements for AP.UN stock lately, from earnings to dividends and acquisitions alike. More recently, AP.UN stock took larger stakes in two well-leased office properties. This was done to strengthen the quality of its portfolio. The company also grew its residential rental market through purchase as it entered the rental space. This will offer even more future growth and diversification.
However, the purchase will surely increase the company's debt in the short term, leading to a sharp drop of around 9% after the results. This could affect debt ratios as well as cash flow per unit in the future. However, management expects these metrics to improve by the end of 2024 due to property sales as well as future property earnings.
In fact, the company is so confident about future results that it announced the approval of a share buyback. This would represent up to 10% of its outstanding shares and could increase the value of the remaining shares if done correctly.
Profits
Then there are the profits to consider. There were mixed results, as mentioned, for the fourth quarter and for the full year 2023. Operating income increased 6% year over year, with a net loss coming from fair value losses on investment properties. Occupancy rates and funds from operations (FFO) decreased slightly, and average rent per square foot increased slightly.
Guidance has now been provided as the REIT expects FFO (FFO) and same-asset net operating income (NOI) to remain flat or slightly down for the year. This is due to uncertain economic conditions, although the company believes they should improve by the second half of 2024.
Analysts viewed these results as weaker than expected, believing that next year could see a 5% drop in FFO. But not everyone was so pessimistic, and some believe the company has a high-quality portfolio and is now undervalued, especially given a high dividend yield and strong balance sheet.
what you could get
If you're looking at this and see an opportunity, let's review what you could get from an investment in AP.UN stock at the time of this writing. Right now, it could earn a dividend yield of 10.32%, and the stock is down 31% in the last year. However, if you invested $5,000, here's what could happen if the stock rallied to 52-week highs.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | FULL PAYMENT | FREQUENCY | TOTAL PORTFOLIO |
| AP.UN – now | $17.25 | 290 | $1.80 | $522 | monthly | $5,000 |
| AP.UN – maximums | $26.25 | 290 | $1.80 | $522 | monthly | $7,612.50 |
As you can see, it could generate returns of $2,612.50 and dividends of $522. That's a passive income of $3,134.50, which comes out to $261.21 monthly! As always, just make sure this aligns with your own risk tolerance before you dive in.
