Fears of the next stock market crash became real on Thursday when markets posted their biggest declines since March. Concerns sounded by the U.S. Federal Reserve coupled with a spike in American COVID-19 cases pressured equities down. The TSX Index and the S&P 500 each declined by 4.14% and 5.89%, respectively.
Are we due for another market crash?
Yet, I actually think the markets needed this. Markets were looking frothy. Everyone seemed to forget we are still facing a major health and economic crisis. I think this was a fair dose of caution that reminded investors to stay vigilant.
As long as the virus still poses a threat, markets will be susceptible to another crash or decline. So, if you are looking for a safe place to hide in volatility, this TSX dividend stock below is an absolute bellwether to buy and hold for a lifetime.
Granite REIT is safe place to hide your capital
Granite REIT (TSX:GRT.UN)(NYSE:GRP.UN) is a perfect stock to hold if markets crash again. Of the TSX REITs, Granite is probably one of your safest bets.
Granite is an industrial-focused REIT with a portfolio of 85 industrial/logistics properties totalling around 40 million square feet. Its portfolio is geographically diversified across Canada, the U.S., and Europe.
Although REITs have generally been pressured from concerns over tenant’s ability to pay rents, that has not been a concern for Granite. In April and May, Granite collected 99% of rents. June will likely be more or less the same.
Its rental income is solid
There are a few reasons why Granite is a very safe stock to hold in a market crash. First, Granite derives 41% of rental revenue from Magna International. Granite was, in fact, a spin-off from Magna many years ago.
While it has significant exposure to one tenant, Granite has a very strong relationship with Magna and its rental income is very secure.
Second, the remainder of Granite’s portfolio (59%) is focused on investment-grade logistics properties. Its tenants include a mix of e-commerce, and distribution giants like Amazon, Restoration Hardware, and Wayfair.
As e-commerce continues to accelerate worldwide, tenant demand for logistics space is growing rapidly, which can only mean strong occupancy and rental rate growth going forward.
E-commerce will fuel long-term growth
Despite the recent market decline, Granite fortunately just re-capitalized its balance sheet. It is now seriously equipped to accelerate growth. Last week, it took advantage of historically low interest rates and issued a $500 million green bond at a cheap fixed rate of 2.964%.
It also issued $289 million of equity, which it quickly deployed into a $332 million, eight property acquisition in the U.S.
The acquisition properties are located in very attractive markets near key e-commerce infrastructure and distribution hubs. Similarly, the properties are only about a decade old with flexible mixed-use designs.
The properties are 100% leased with an average weighted lease term of 5.1 years. Despite the acquisition, Granite still has $1.1 billion of liquidity to fuel future acquisitions and fund its 2.4 million square foot development pipeline.
A perfect haven in a market crash
Granite is an all-around great stock to own if markets decline again. It is a very low beta stock. It held up very well in the March crash and will likely do so again in another crash.
Granite has a sector-best 21% net leverage ratio and its balance sheet, for a REIT, is pristine. Similarly, it pays a solid 4.4% dividend well-funded by cash flows (81% AFFO payout ratio).
Granite is already a Dividend Aristocrat. Given the recent acquisitions and attractive outlook, dividend growth should continue for many years.
To sum up, this stock gives you security in the storm and ammunition for growth. Even if the market crashes again, Granite is a rock-solid place to trust your money.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Robin Brown owns shares of Amazon and GRANITE REAL ESTATE INVESTMENT TRUST. David Gardner owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and Wayfair. The Motley Fool recommends Magna Int’l and RH and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon.