1 Oversold Dividend Stock (Yielding 6.5%) to Buy This Month

Here’s why SmartCentres REIT (TSX:SRU.UN) is one top dividend stock that long-term investors should consider in this current market.

| More on:
woman data analyze

Image source: Getty Images.

The Canadian real estate market witnessed a grueling year in 2022, as interest rate hikes ravaged investor sentiment for risk assets. Indeed, for real estate stocks paying high dividend yields, it’s been a rather rough go over the past 12 months.

That said, there’s reason to believe that this sentiment could be about to shift. The Toronto Regional Real Estate Board (TRREB) even recently suggested that the market outlook will take a positive turn in 2023. 

The earnings from the Canadian residential real estate market have witnessed 24% year-over-year growth over the last three years. The real estate market has been projected to grow at a rate of 10% over the growth period of 2023-28. Accordingly, as longer-term revenue growth continues to hover around the 6% range, it’s clear that there’s some strong long-term trends to ride higher.

With this in mind, SmartCentres REIT (TSX:SRU.UN) may be an excellent option to consider on dips moving forward. This real estate investment trust (REIT) now pays a dividend yield of more than 6.5% and is among the more overlooked options in this space, in my view.

SmartCentres REIT sees impressive insider investment 

It is excellent news for shareholders when insiders keep investing in the company’s shares, and this has happened in the case of SmartCentres REIT. Also, long-term investors should keep an eye on what the insiders are doing. 

Over the last 12 months, insiders have shown interest in only purchasing SmartCentres shares and not selling them. The biggest purchase was made by Executive Chairman & Chief Executive Officer Mitchell Goldhar for approximately $6 million worth of shares at about $25.58 per share. Currently, insiders own 8.9% of this company. 

However, SRU has the largest group of individual investors with 68% ownership. This means that the company’s investor base is broad — something new investors ought to like.

Stable fourth-quarter earnings reported by this dividend stock 

SmartCentres has recently announced its fourth-quarter (Q4) and full-year earnings report in February 2023. Gross rental income for Q4 has increased by $2.2 million, up by 1.7% from Q4 2021. 

The REIT’s funds from operations (FFO) increased by $1 million, a 1.1% hike when compared to Q4 2021. And for 2022, FFO has increased by $9.6 million or 2.7% when compared to 2021. 

Additionally, CIBC (TSX:CM) has raised its target price from $33 to $34 for SmartCentres REIT. The firm currently has a market capitalization of $3.64 billion and a price-to-earnings ratio of 3.51. 

SmartCentres REIT currently offers an impressive dividend yield of 6.5% and has a payout ratio of over 90%. Most likely, it will need to boost its income from rental properties to mitigate the risk of rising interest rates. 

Bottom line 

A large part of the shareholders of SmartCentres REIT consists of individual investors, even though the institutional ownership is commendable. With a dividend yield of 6.5%, it is quite evident that if you invest in this stock with a long-term objective, you will be rewarded with quality dividend payments. 

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.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends SmartCentres Real Estate Investment Trust. The Motley Fool has a disclosure policy.

More on Dividend Stocks

A worker uses a double monitor computer screen in an office.
Dividend Stocks

2 of the Best Canadian Stocks That Pay Out Monthly

These two Canadian dividend stocks are some of the best to buy, offering yields upwards of 5.4% and returning cash…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Passive-Income Seekers: 4 Safe Dividend Stocks to Own Beyond 2033

Dividend stocks are great, but only if they continue to perform after downturns as well. In the case of these…

Read more »

clock time
Dividend Stocks

How Investors Can Build a $1 Million Portfolio in 12 Years

If you can handle it, you can certainly create a million-dollar portfolio in just 12 years, especially considering this dividend…

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

4 Big Dividend-Paying Stocks for 2023

These four stocks all earn strong cash flow and offer attractive dividend yields, making them some of the best to…

Read more »

grow dividends
Dividend Stocks

This 7.5 Percent Dividend Stock Pays Cash Every Month

If you need cash now, this dividend stock is certainly one I would consider that could double in share price…

Read more »

Path to retirement
Dividend Stocks

Need Passive Income? Turn $6,000 Into $106 Every Month

Find the right dividend stock for stable growth and you can turn $6,000 into $106 each month!

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

2 Top Stocks to Supercharge Your TFSA Into a Cash Cow

IA Financial and Brookfield Renewable Partners are great passive income generators for new TFSA investors.

Read more »

edit Real Estate Investment Trust REIT on double exsposure business background.
Dividend Stocks

Invest in This 7.5% Dividend Stock for Passive Income

This dividend stock could provide you with double the amount of annual passive income by investing now instead of at…

Read more »