Down 60%, This Dividend Stock Is Worth a Closer Look

Buying a monthly dividend stock when it is down can be a smart move for one simple reason: you get paid to wait. A lower share price can lift the yield, give you more upside if the business stabilizes, and make monthly cash flow feel even more useful. Of course, that only works when the payout still looks supportable and the assets underneath the stock still matter. That is the real test. When those boxes are checked, a beaten-down monthly payer can start looking a lot more attractive than scary.

Allied Properties REIT: Urban Office at a Distressed Price

Allied Properties REIT (TSX: AP.UN) is one of the more interesting — and more debated — situations on the TSX right now. It owns distinctive urban office and workspace properties in major Canadian cities, with well-known downtown assets aimed at knowledge-based tenants. That has long given Allied a premium reputation in the office REIT space.

Over the last year, the story has clearly shifted from easy growth to repair work, and investors need to go in with eyes open about how significant that repair job is. Allied cut its monthly distribution in December, lowering it to $0.06 per unit per month, or $0.72 annualized — a 60% reduction. Then in February 2026, it raised $560 million in equity: $400 million through a public offering (which exceeded the original $350 million target) and $160 million in a concurrent private placement to AIMCo. That offering was issued at $10 per unit — above where the stock now trades — and was highly dilutive, adding 40 million new units to the share count. Proceeds went primarily to repay a $600 million debenture that had come due.

There was also a leadership transition: founder Michael Emory is departing as executive chair in spring 2026 after stepping down from the CEO role in 2023, when current leader Cecilia Williams took over. That marks a genuine changing of the guard at a critical moment for the trust.

There were some better operating signs beneath the uglier headlines. Allied said second-half 2025 leasing activity was its strongest second half since 2020, with total leasing up 16% year over year. At year-end, occupied area was 85.3% and leased area was 87.4%, while sublease space dropped sharply to 2.6% of gross leasable area from 5.7% a year earlier. Demand is not roaring back, but conditions are not standing still, either.

The Earnings and the Plan

The 2025 earnings were messy. Rental revenue held roughly steady at about $592 million, but operating income slipped and Allied recorded a $128 million expected credit loss tied to two remaining loans receivable, alongside a massive $1.4 billion IFRS valuation adjustment as higher cap rates and slower leasing weighed on property values — producing a net loss exceeding $1.3 billion for the year.

The more encouraging part is that management has an explicit plan. Allied is targeting around $500 million of non-core property sales in 2026, with $29 million already closed in Q1 and another $17 million under firm agreement. The remaining disposition pipeline of approximately $454 million includes two substantial rental-residential assets. Management guided for 2026 FFO of $185 million to $200 million and expects net debt to EBITDA to land in the mid-11 times range by year-end, with further improvement beyond that and an occupancy target of 88% to 90% by 2028.

It is worth noting that analyst sentiment has cooled significantly. Desjardins downgraded to Sell and TD Cowen moved to Hold following the equity offering. The consensus is cautious, with the average 12-month price target around $9.88.

Valuation

Valuation is where the case gets interesting, but it requires patience and risk tolerance. Allied recently traded around $9.10, versus a 52-week high of $22.27, down about 60%. At the new annualized distribution of $0.72, the forward yield is approximately 7.9%. That is still a meaningful monthly payout with a lower coverage burden than before. For now, here is what $7,000 could generate:

COMPANYRECENT PRICENUMBER OF SHARES YOU COULD BY WITH $7,000ANNUAL DIVIDENDTOTAL ANNUAL PAYOUT ON A $7,000 INVESTMENTPAYOUT FREQUENCYAP.UN$9.10769$0.72$553.68Monthly

Bottom line

Allied is not a low-risk “forever stock” right now. It is a recovery story with a monthly distribution attached. But that can still make it worth holding indefinitely — for the right investor. The units are down hard, the yield is still solid, and management is finally taking decisive steps to strengthen the business. Sometimes the best long-term buys are not the prettiest ones. They are the ones that survive the ugly stretch and come out leaner on the other side.

The post Down 60%, This Dividend Stock Is Worth a Closer Look appeared first on The Motley Fool Canada.

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More reading

• These 2 Canadian REITs Yield at Least 7%, and Here’s What You Need to Check Before You Buy
• 3 Canadian REITs for an Income Portfolio That Holds Up in Any Market
• 2 Stocks Every Canadian Retiree Should Seriously Consider Avoiding

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.