Updated on March 8th, 2023 by Samuel Smith
International REITs could be a valuable option for investors interested in diversifying their portfolios. There are many international Real Estate Investment Trusts based outside the U.S. with quality business models and high dividend yields.
One example is Granite Real Estate Investment Trust (GRP.U) (GRT-UN.TO), a REIT based in Canada. Not only does Granite have a proven business model, but it also pays a 3.9% dividend yield, which is about twice the level of the S&P 500.
Granite also pays its dividend monthly; a more attractive dividend schedule than REITs which pay dividends quarterly.
Granite is one of 84 stocks that pays monthly dividends. You can access the full database of monthly dividend stocks (along with important financial metrics such as price-to-earnings ratios and dividend yields) by clicking on the link below:
Granite is listed in both Toronto and New York, and for this article, we’ll be using the New York listing and US dollars.
This article will outline Granite’s business model and discuss its merits as a dividend stock.
Granite owns and manages predominantly industrial real estate properties in North America and Europe. It converted to a REIT on January 3, 2013, and has transformed itself into a leaner, more efficient trust, with higher-quality assets.
Source: Investor presentation
Over time, Granite has grown from a smaller, less valuable portfolio that was almost entirely dependent upon one tenant (Magna), to a diversified, much larger portfolio with significantly higher average property values. The trust has undergone a transformation in recent years to reach these goals, and it is clear that effort has paid off.
Magna is now 21% of the portfolio, and the portfolio as a whole is meaningfully more diversified between tenants and property types.
The trust’s income-producing portfolio consists of Multi-Purpose, Logistics and Distribution Warehouses and Special-Purpose facilities. It owns a total of 58.8 million square feet spread across 134 properties in Europe, Canada, and the U.S. Combined, these properties have a carrying value of about $8 billion.
Source: Investor presentation
Granite is present only in countries with little or no geopolitical risk and in properties and industries with strong long-term fundamentals. It is still very heavily concentrated in the US and Canada, with a little more than two-thirds of its property’s square footage located in North America.
Still, its international exposure provides a diversifying component to the trust’s results. Granite focuses on properties that support e-commerce development and are located strategically to support such businesses in the best markets.
Source: Investor presentation
Granite seeks out areas that have proximity to major cities and have favorable demographics, including major infrastructure and available labor pools. In addition, it buys already modern properties, meaning capital expenditure needs are low, with tenants with high switching costs.
These characteristics mean that Granite chooses only the most favorable properties to own with long-term tenants with the best chance of thriving in various economic climates. Finally, it focuses on the enormous shift to e-commerce, with a particular focus on food and pharmaceuticals.
In short, Granite is betting that these characteristics will fuel its future growth, and results have certainly supported that notion.
Granite’s outlook is positive from a fundamental perspective, with the trust in the midst of a transformation. Granite is in the final stages of its years-long transformation in which it is optimizing its cost of capital, leverage on the balance sheet, and reaching what it considers a saturation point in critical target markets.
The trust went through a period of significant transition in recent years, switching out its CEO, board, and leadership team. Today, the trust is focused on transforming its portfolio through the sale of non-core assets, enhancing its presence in the U.S, and making purchases in select European markets.
Granite delivered on its prior stated goal of boosting the portfolio to more than 40 million square feet and carrying value of more than $4 billion, and is now at roughly $8 billion, so we believe the highest levels of growth are likely behind the company. That said, future growth will be comprised mainly of rental increases, and selective acquisitions that are accretive to FFO. Acquisitions make up a large part of the company’s growth strategy, as they have completed billions of dollars in acquisitions over the last few years in key locations.
Granite appears to have achieved its growth goals earlier than expected, and as a result, we expect incremental investment to slow somewhat in the coming years. There is still a development pipeline in progress, with some properties in Europe and North America. However, Granite’s transformative moves have largely been completed.
Trends for e-commerce remain overwhelmingly positive and given the impact on physical retailers of COVID-19, it appears the trend towards e-commerce has only accelerated, which is a positive for Granite. It is therefore concentrating assets that fit its investment criteria to capitalize.
Granite’s growth outlook is favorable, given that it should continue to see higher rent prices and a larger investment book through acquisitions and development.
Granite currently pays a monthly dividend of $0.2667 per share in Canadian dollars, which equates to ~$0.19 monthly in US dollars.
On an annualized basis, the current regular dividend payment is $3.2004 per share in Canadian currency. In U.S. dollars, this works out to roughly $2.32 per share. This equates to a 3.9% yield.
If U.S. investors own the stock, returns will be subject to currency risk as it is translated from Canadian dollars to U.S. dollars. The dividend to U.S. investors will depend in part upon prevailing exchange rates, which currently stand at $1 CAD = $0.73 USD. Another important consideration for investing in international stocks is withholding taxes.
Note: As a Canadian stock, a 15% dividend tax will be imposed on US investors investing in the company outside of a retirement account. See our guide on Canadian taxes for US investors here.
Granite’s 3.4% dividend yield is supported with underlying cash flow. Based on adjusted FFO for 2021, Granite’s payout ratio is 71%. That is slightly below previous years and considered safe in the REIT universe.
We believe Granite is going to grow FFO in the coming years and reduce the payout ratio, so in conjunction with the current fair payout ratio, we see the distribution as safe.
Investors can receive high levels of income and diversification benefits by considering REITs based outside the United States. Granite REIT is a good example of an international REIT with a high-quality business model, and a fair dividend yield of 3.9%.
The trust has largely completed its transformation effort that diversified its portfolio, reduced risk, and enhanced its earnings growth prospects. We see this as supportive of future dividend increases, as the payout ratio has been reduced significantly. As a result, Granite remains an attractive option for investors looking for monthly dividends and a 3%+ dividend yield.
Don’t miss the resources below for more monthly dividend stock investing research.
- The Monthly Dividend Stocks List
- 20 Highest Yielding Monthly Dividend Stocks
- 10 Cheapest Monthly Dividend Stocks
- 10 Safest Monthly Dividend Stocks
- 3 Top ‘Hold Forever’ Monthly Dividend Stocks
And see the resources below for more compelling investment ideas for dividend growth stocks and/or high-yield investment securities.
- Dividend Kings: 50+ years of rising dividends
- Dividend Champions: 25+ years of rising dividends
- Dividend Aristocrats: 25+ years of rising dividends and in the S&P 500
- Dividend Achievers: 10+ years of rising dividends and in the NASDAQ
- High Dividend Stocks: 4%+ dividend yields
- Blue Chip Stock: Kings, Aristocrats, and Achievers
- MLPs: List of MLPs and more
- REITs: List of REITs and more
- BDCs: List of BDCs and more