Investors continue to look for opportunities for superior income now that we’ve entered 2024. Much of this could come from real estate investment trusts (REIT), though they can be a bit risky in this market.
However, the market is already on the rebound. Which is why now is a great time to pick up strong dividend stocks and REITs before we see a full recovery. And one of those might just be Slate Grocery REIT (TSX: SGR.UN).
Up and down
Slate stock managed to see a huge climb during the pandemic, with shares rising higher thanks to its investment in grocery-anchored chains across the United States. Yet during this downturn, with inflation running higher and higher, consumers were finding other places to go.
This has led analysts to downgrade Slate stock over the last two years. Yet the big question is now whether it can recover in the near future? The stock for now is pegged as performing as well as the rest of the sector. There remains a challenging macro setup with higher interest rates and inflation remaining, after all.
However, SGR.UN remains stable and healthy, with demand remaining steady and indeed will increase in the year to come. Therefore, the stock looks like it remains safe, and valuable given its current share price.
What earnings tell us
During the company’s most recent earnings report, results were stable. Leasing remained strong, with an attractive rental spread that allowed for gains in occupancy as well as net operating income, management stated. In fact, the stock even managed to make new deals, with a 20-basis point occupancy gain over the quarter before.
As for the higher interest rate issue, the company managed to retain most of its total debt fixed with a weighted average interest rate of 4.2%. Furthermore, its $12.37 per square foot average rent remains well below market average. Therefore, there is still room for net operating income (NOI) growth.
Finally, the company’s units are seen as trading at a discount based on 12-month NOI performance. At the time, this represented a 41.1% discount in net asset value (NAV). Therefore, investors wanting gains in the future were compelled to consider the stock. In fact, Slate stock did just that, buying back 1.2 million shares in the nine previous months.
Growth is coming
All this is to say that growth will come eventually, though it isn’t clear when. However, when that growth does come, you’ll have been glad to pick up Slate stock with a dividend yield at 9.29%! In fact, if you were to put $2,000 into this stock as of writing, let’s see what you could achieve in the next year.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| SGR.UN – now | $12.40 | 161 | $1.15 | $185.15 | monthly | $2,000 |
| SGR.UN – highs | $16.40 | 161 | $1.15 | $185.15 | monthly | $2,640.40 |
All together, you could achieve returns of $640.40 as well as $185.15 in dividend income. That could create passive income of $825.55 in just a year! So continue to keep Slate stock on your radar. Especially if you’re looking for some extra passive income.
