TSX:SOT.DB - Post by User
Comment by
MDawg65on Mar 05, 2019 6:30pm
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Post# 29446585
RE:FYI
RE:FYI article is a bit dated and refers to Toronto housing bubble- they ar e a commerical real estate trust so I don't think the thesis of overstated home prices and potential bubble bursting is a valid argument.
The drop in dividends was a bit shocking though many had forecasted it. However unlike many companies who were unprofitable yet maintained a high dividend payout, this company has been profitable and has been ably recycling properties that it buys low, fixes up and then sells off once it increased the occupancy rates on the buildings.
This time the timing seemed odd. Firstly they announced they had just sold 25 % of their GTA portfolio- It wasn't clear how much of a gain they booked, but it will free up some capital to pursue more acquistions. Plus they are changing their capital mix, ie moving out of ST debt to more medium term fixed rates of finance, which ultimately should reduce the variablity of their interest costs and be a more stable rate of interest to go seek future acquisitions with.
They are talking about the NAV being $ 8.55 and when issued the stock was $ 6.70 before they lowered the dividend boom. I just don't now if the additional $ 26 mn they will save in dividends will get them a better property. They are basically saying we can make a better return and drive the stock up by being more profitable. But then why talk about a NCIB in the same week as you cut the dividend.
I think their overall strategy to grow the company and make it more profitable seems reasonable and I think they will execute on this strategy. I just think the dividend cut didn't need to be so drastic especially when the stock was already in the dump.