Canadian investors continue to seek out passive income through at least one solid dividend stock. But what makes it solid? Even better, what would make it defensive?
Today, we’re going to look at a monthly passive income provider that offers just that. It’s a defensive payer that continues to produce solid income every single month.
Slate Grocery REIT
If you’ve been reading the Motley Fool for a while now, you’ve likely come across Slate Grocery REIT (TSX: SGR.UN) several times already. It’s clear why, with an incredibly high dividend yield at 9.04% as of writing, and trading at just 6.6 times earnings.
But that means nothing if the stock can’t hold it up. However, analysts continue to believe it will. During its most recent earnings report, analysts stated they continue to see Slate stock as a “defensive” stock in the grocery-anchored real estate industry.
Yet even with positive results, some analysts worried these earnings came in lower than expected. So should investors be concerned?
The long and the short of it
In case you’re not familiar, Slate Grocery REIT is a real estate investment trust (REIT) with 121 grocery-anchored properties across 24 states in the United States. It makes partnerships with major brands including Walmart and Kroger.
With these partnerships come stability and defensive portfolios. The average lease agreement for these properties sits in the range of 5 and 10 years. This can certainly help during times of trouble such as what the rest of the market is going through right now.
Yet it also provides diversification compared to Canadian companies in the same industry. Slate Grocery REIT has several major partnerships, and more with smaller companies. However, there is simply more competition in the United States providing it with a wider range of partnerships. Meanwhile, here in Canada there is far less competition to be had, so you simply do not get that diversification.
Remaining valuable
While there has been only slightly positive results recently, investors can likely be certain that the stock will recover from this diversification in a stable industry. Meanwhile, they can pick up the stock for high income, strong value and long-term gains.
Shares currently trade at 6.6 times earnings as mentioned, as well as 1.1 times book value. This puts it well within value territory. Shares are also down 10.5% in the last year for more added value. It’s now back to where it hovered over the last several years after climbing in the last year or so.
And that here is the key. Investors are buying this dividend stock for passive income, not as a growth stock. While shares are likely to climb back to pre-fall prices, it may not be as fast as one would hope. Further, there is likely to be small increases similar to what we’ve seen over the last few years.
So while the stock is stable, definitely consider it for its stable dividend not for a sudden boost. Even still, it’s certainly one to consider right now at such valuable levels, and with an ultra-high 9% dividend yield.
