Relatively new to the Canadian REIT market, but investing heavily for future retirement in maybe 2017. I am thinking of doubling exposure to DRG.UN for the high dividend and exposure to Germany. Would appreciate your input.
Hey Kevin, Thanks for the assignment. Dream Global Real Estate Investment Trust (DRG.UN TSX) invests in commercial real estate outside of Canada. They own 208 properties in Germany and Austria having taken advantage of low borrowing rates in Europe.
As with any investment in a foreign jurisdiction you have to stay on top of currency risk.If the Euro moves higher it boosts your returns if it falls it cuts the other way.
DRG.UN offers a generous payout that yields 9.15%. In the current low yield environment it makes for a very tempting attractor. Just be aware that distributions from a REIT are not guaranteed and as such you have to monitor the ability of management to continue to create value.
A probe of the charts will add a technical element to your evaluation of this investment opportunity.
The three-year chart indicates that DRG.UN had been selling off since it hit its 52-week high of $10.45 in April of 2015. The decline saw the shares break below the 50 and 200-day moving averages by August of that year and the formation of a death cross in late September. The retreat finally came to an end in February of 2016 as the MACD and the RSI generated buy signals. The bounce off $7.50 was quite vigorous taking the units up and through resistance along the moving averages and the downtrend line.
The six-month chart pulls into focus the buy signals from the momentum indicators and the move through resistance over the last number of weeks. At present there are no signs that the units are about to start a retreat.
There are a lot of moving parts to this investment given that your money is working offshore. Germany and Austria are not extremely high risk jurisdictions but the health of the European Union and the Euro Zone demand constant monitoring.
Next time I will re-examine the case for Performance Sports Group Ltd. (PSG TSX) for David. Make it a profitable day and happy capitalism!