Is Slate Grocery REIT a Buy?

Slate stock (TSX:SGR.UN) seemed unstoppable, until inflation and interest rates rose. Now, what should investors do with the stock?

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.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYPORTFOLIO TOTAL
SGR.UN – now$12.40161$1.15$185.15monthly$2,000
SGR.UN – highs$16.40161$1.15$185.15monthly$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.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Slate Grocery REIT. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Real estate investment concept
Dividend Stocks

Paying Off the Mortgage or Saving for Retirement First? A Guide for Your 40s and 50s

Find out how rates, renewals and tax rules shape your choice in your 40s and 50s, and where blue chip…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

$14,000 in a TFSA: 2 Stocks I’d Buy for Meaningful Monthly Cash Flow

Cardinal Energy (TSX:CJ) and another monthly income play that's fit for those seeking huge dividends and deeper value.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How to Use a TFSA to Generate an Average of $500 in Monthly Tax-Free Income

Unlock the potential of a TFSA for tax-free savings. Discover strategies to generate income while minimizing taxes for the future.

Read more »

senior man smiles next to a light-filled window
Dividend Stocks

This Stock Pays You a 4.7% Dividend Every Single Month

Sienna Senior Living's seemingly safe 4.7% monthly dividend yield, eligible dividend tax perks, and strong growth potential appear attractive today

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

Most Canadians Pick the Wrong Investing Account First: Don’t Be One of Them

Your first investing account matters far more than your first stock. Compare the TFSA, RRSP and FHSA for 2026 and…

Read more »

money goes up and down in balance
Dividend Stocks

Building a Retirement Paycheque: Where Each Dollar Comes From

Thinking about retirement? Find methods to create passive income to cover daily expenses and enhance your financial freedom.

Read more »

Three children jump on an outdoor trampoline
Dividend Stocks

The RESP Deadline is December 31: Ottawa Adds 20% for Free

An affordable RESP contribution can attract a 20% basic grant, with December timing, catch-up limits, and the child's age shaping…

Read more »

jar with coins and plant
Dividend Stocks

Dividend Stocks or Annuities for Retirement Income?

Here's how Canadian dividend stocks and annuities compare as retirement income sources

Read more »