Q: I am sitting on some of this at a higher ACB and have had it for some time. I like the income, but the price has been in a decline. The culprit high interest rates with them being heavily leveraged, looks like they aren't growing enough to overcome. Looks like they will not be increasing the dividend this year which is not a good sign given their history. I do have patience and some cash. I also think they have a solid tenant base, the business seems to make sense. Would you buy down hanging on hope of interest rate cuts or would you dump and look at another name?
5i Research Answer:
NET.UN is cheap at 7.6X cash flow, reflective of its rate sensitivity and small size (only $102M). Yield is 6.94% with the last distribution increase in November 2022. Growth is indeed low, with EPS expected to be less this year than it was three years ago. Payout ratio (2023) is quite reasonable at 64% (company notes 54%). Occupancy is 100%. Other than its small size, we do not see a whole lot of concern here, especially when compared with peers. We would be comfortable holding it for higher-risk income, but would not add. It is only down 4% in the past year, which is an OK performance (relative to the group).