Slate REIT Stock Is Beaten Down Now, But it Could 10X

Slate REIT (TSX:SGR.UN) stock should see shares rebound in the next year, as large food stocks look to expand after cutting back.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published January 30, 2024 4:50 pm EST

Investors looking for opportunities may be stuck on the big and bold names in 2024. However, analysts are now suggesting it might be time to take a bite out of the food sector, especially in the United States.

Slate Grocery REIT (TSX: SGR.UN) shares are currently down 18% in the last year. Let’s get into what’s coming and why investors should buy Slate REIT stock right now.

Growth improvement

The next year in the food sector should see a lot of deal activity in the United States. This comes as lower purchasing has led companies to seek out growth by other means, including through mergers and acquisitions as well as spinoffs and divestitures.

The reason we’ll likely see more in 2024 is because of the last year’s improvements — not in share price, certainly, but in balance sheets. Companies used the high interest rate environment to improve their state and cash flow. Now, that cash flow needs to grow again, and Slate REIT has already made the cuts.

So, while analysts have no specific idea of who or what will start acquiring or selling, balance sheets remain strong for several large food companies — all while remaining at quite compelling valuations.

What to watch

What companies such as Slate REIT stock will be watching are deals coming through large-cap food companies. Ones that the company has partnerships with, of course. These companies are expected to generate US$8 billion in free cash flow after dividends this year, according to analysts.

While it’s unclear when rate cuts will happen and when inflation will bring back consumers rather than keep them away, there should still be modest growth in sales. Those sales should trickle back into the hands of Slate REIT stock investors, especially if more deals come through.

So, is Slate REIT stock a good investment now?

Remaining strong

After companies found places to cut expenses, which included Slate REIT stock, they’re now looking to grow. This could mean creating partnerships and deals with Slate once more. That would bring up its occupancy rate, especially in a better interest rate environment.

For now, Slate is a steal. Shares trade at 2.84 times sales, offering a 9.12% dividend yield as of writing! That’s incredible income that you can bring in during this next year when the market will be improving.

In fact, if you were to bring in Slate REIT stock now and see shares rise back to 52-week highs, that would be a huge improvement — one that could see major gains in your portfolio. Here’s what just $5,000 could bring in for 2024.

COMPANY	RECENT PRICE	NUMBER OF SHARES	DIVIDEND	TOTAL PAYOUT	FREQUENCY	PORTFOLIO TOTAL
SGR.UN – now	$12.69	394	$1.16	$457.04	monthly	$5,000
SGR.UN – highs	$16.38	394	$1.16	$457.04	monthly	$6,453.72

As you can see, returns could reach as high as $1,453.72, with dividends at $457.04! That would create passive income totalling $1,910.76. And that’s just in 2024 alone. So, consider Slate REIT stock during this next year. It’ll be worth it.