BTB Reit keeps dividend while improving the payout ratio

   On November12 BTB Reit released it's third quarter results.The caption above shows improvements being made to an apartment in an apartment building.And that is what BTB does.It buys and improves relatively small buildings which are usually but not always residential buildings in Montreal,Quebec City and the Ottawa area.Once the buildings have been improved BTB sells them for a gain.And BTB is quite active in it's buying and selling operation.In fact now it owns 66 buildings with an asset value of almost $1 billion for an average value of about  $15 million per building.
      Performance Improvements

    In late 2018 and early 2019 BTB had some large tenants cancel their leases.Consequently their occupancy rates fell to about 88 -90%.Now it has improved to almost 94 %.This has increased revenues and earnings.In fact, adjusted net income has increased 24% over Q3in 2018.This is the best measure of performance but not all  of their performance statistics are as robust.However at one point their dividend was in jeopardy as the payout ratio was at 112%.Now with the increase in net income the payout ratio is at 97% and will likely fall further in Q4.The payout ratio was at 85% in 2017 and this blog believes it will return to this area soon.
      Back to Old Levels
 For the last 5 years (since 2016) BTB has had excellent growth in assets,revenues and earnings.In fact, revenues increased by 20% since 2018.During this period it raised it's dividend so that now it yields 8%.This growth was coupled with fairly rapid turnover of residential building assets.This has resulted in not as secure tenancy as in 2016 for example.And consequently there have been some substantial lease cancellations in 2017 and again in 2018.BTB tells investors now that tenant retention rates improved by 50% in 2019. And there have been increases in renewed leases.This blog sees improvements in this area in Q4 as well as 2020.
                             

    The present P/E ratio is about 8 which is very cheap.But investors are calculating a risk-adjusted P/E of about 12 (a 50% increase) with the past tenancy problems.This is still a relatively inexpensive buy,especially with the healthy dividend.BTB has been moving up slowly since Q2.This blog sees continued movement up to the $5.50 level if Q4 shows continued improvement in tenancy security.If this happens then the payout ratio will again fall back to the 85% ratio.