You can generate a steady stream of passive income with a small amount of capital by investing in dividend stocks. There are several real estate investment trusts, or REITs, trading on the TSX that offer shareholders a tasty dividend yield.
Generally, REITs own, acquire, and operate a portfolio of properties that are leased out to individuals or businesses, allowing them to earn rental income, a portion of which is distributed to shareholders via dividends.
One such high dividend REIT is Slate Grocery (TSX:SGR.UN), which offers you a forward yield of 11%. So, an investment of $15,000 in this REIT will help you earn $1,650 in annual dividend income.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Slate Grocery | $10.63 | 1,411 | $0.098 | $138 | $1,656 |
Is Slate Grocery a good dividend stock to buy now?
With $2.4 billion in total assets, Slate Grocery is a pure-play grocery-anchored REIT. It has 117 properties spanning 15.3 million square feet located in 24 U.S. states. It completed over 690,000 square feet of total leasing in the third quarter (Q3), and new deals were done at 18.4% above comparable average in-place rent.
Moreover, non-option renewal spreads were strong at 14.8% above expiring rents. Slate emphasized its leasing momentum continues to support occupancy gains allowing it to end Q3 with an occupancy rate of 94%. Further, the same property net operating income for Slate Grocery rose 2% year over year in the September quarter.
At $12.37 per square foot, Slate Grocery’s average in-place rent is below market, providing a significant runway for continued bottom-line growth and cash flow stability.
Typically, REITs are capital-intensive and fund a majority of their expansion plans via debt. Investors are worried about high-debt companies due to rising interest rates and a challenging macro environment. However, Slate Grocery maintained the majority of its debt is fixed at a weighted average interest rate of 4.2%.
Companies operating in the grocery segment are recession resistant and have a proven ability to outperform in periods of economic volatility. Moreover, Slate Grocery is positioned to benefit from strong tenant demand and low vacancy rates, while limited new construction provides a backdrop for continued rent growth.
What is the target price for Slate Grocery stock?
Slate Grocery’s portfolio consists of the world’s largest, credit-worthy grocers, including six of the top seven U.S. grocers by market share. Additionally, these properties are key to the distribution of in-store and home-delivery grocery sales.
With a strong presence in growing U.S. markets, Slate Grocery’s leasing spreads have historically outpaced inflation. Around 98% of its tenants are on net leases, which offers protection against rising operating expenses.
Around 3.8 million square feet, accounting for 25% of the company’s gross leasable area, have leases expiring in the next three years, making it a top investment choice right now.
Slate Grocery has executed over $900 million in acquisitions, allowing the REIT giant to drive cash flows higher and support a high dividend yield.
Priced at 8.4 times future cash flows, Slate Grocery stock is quite cheap compared to its peers. Analysts remain bullish and expect the stock to surge 28% in the next 12 months. After accounting for its high dividend, total returns may be closer to 40%.
