13% Pullback = Another Purchase
Recently a stock in my portfolio got hammered hard! Seems like the market overreacted and created a great buying opportunity. The stock was trading around the $48.50 mark and after announcing their 2nd quarter results the stock plummeted %12.93. Who and why?
Boardwalk Real Estate Investment Trust (the Trust) is an open-ended real estate investment trust (REIT). The Company is focused on the acquisition, refurbishment, management, ownership and development of multi-family residential communities within Canada. The Trust owns over 200 properties containing approximately 33,770 residential units within the Provinces of Alberta, Saskatchewan, Ontario and Quebec. Representing over 30 million net rentable square feet. Its assets represent a portfolio of residential real estate, both from the standpoint of geographic diversification and mix of asset type, which consists of mid-sized suburban and downtown apartment buildings, and regional, mid-sized community and neighborhood residential centers located in urban markets. Their residential properties in the portfolio are located in Montreal and Quebec City, Quebec; London and Kitchener, Ontario; Saskatoon and Regina, Saskatchewan, and Edmonton, Grande Prairie, Banff, Red Deer and Calgary, Alberta
Why the Pullback?
Why did the stock pullback so much? Because their income was lower. It is actually that simple. Due to them deciding to go big and renovate a lot of units the first half of 2017. Roughly 2,300 units for the first half of the year. As of June 30,2017 1200 are still in reno’s, representing 1.7 million dollars in monthly rent they are missing out on. As a result, suite renovations have resulted in approximately 12% accretion in Net Asset Value and a return on cost of 8%.
June 2017 they had a 95.6 percent occupancy rate, which is showing a upward trend. While between July 2016 to March 2017 they had a occupancy rate of 94-93 percent. In addition they also feel Alberta’s economy is starting to rebound which is great since they own a lot of units there. =)
Boardwalk REIT currently offers a 5.34% yield. The payout ratio is currently to high, but I believe that it’s warranted with that many units out of commission. So after this great pullback I decided to add another 89 units at $42.15 to the portfolio. This will add $200.25 to our forward dividend’s.
Matt at All About The Dividends did a great write up about the pullback of Boardwalk REIT aka RED FRIDAY. Therefore it made me look into them more as well. Check out his Article.
Sometimes the market throws ya a bone! As a result of the renovation’s I feel Boardwalk REIT is a great stock to own and is making moves to increase their profit margins per unit. Short term it looks bad. But by the end of year when all the renovations are complete and the profits increase you know I’ll be smiling!