Should You Buy This TSX Dividend Stock for Its 7.9% Yield?

Purchasing 1,000 shares of this Canadian company could help you make $154/month.

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Dividend-paying stocks offering high yield attract income investors. Opting for these stocks can reduce the time it takes to recoup your investment and help you beat inflation. 

Thankfully, the TSX has several top-quality stocks offering high yields. However, not all high-yield stocks are dependable bets. Thus, when looking for high-yield stocks, investors should consider a company’s dividend distribution history, the sustainability of its payouts, and the overall financial health of the firm.

Against this backdrop, let’s zoom in on a Canadian stock offering a 7.9% yield near the current levels. 

A top high-yield dividend stock

Speaking of high-yield TSX stocks, SmartCentres Real Estate Investment Trust (TSX:SRU.UN) could be a solid addition to your portfolio to generate worry-free income. This real estate investment trust (REIT) distributes most of its earnings as dividends and offers monthly payouts, making it a compelling investment for income-seeking investors. 

SmartCentres’s high-quality real estate portfolio, strong fundamentals, and consistent track record of dividend payments support my optimistic outlook. Further, this REIT pays a monthly dividend of $0.154 per share, which translates into a yield of over 7.9% based on its closing price of $23.32 on March 4. 

Why to invest in SmartCentres REIT? 

The primary reason to invest in SmartCentres REIT is its attractive yield and the reliability of its monthly distributions. The firm’s distributions are backed by its resilient real estate portfolio, helping generate solid same-property net operating income (NOI). Notably, SmartCentres had ownership interests in 191 properties as of December 31, 2023, including 155 retail properties. 

The higher concentration of retail properties drives sustainable cash flows and boosts its occupancy rate. This, in turn, drives its payouts. During the last quarter’s conference call, the firm’s management emphasized that the leasing activities remain robust, with both existing and new retailers expressing interest in expanding into various growing markets. Moreover, there’s a growing demand from major retailers for newly built retail spaces, indicating positive market dynamics.

SmartCentres boasts strong tenant retention and renewal rates, indicative of increasing demand for its retail spaces. Investors should note that SmartCentres REIT has a top-quality tenant base, including the likes of Walmart, and a high occupancy rate of 98.5%. 

While its retail properties add stability, drive cash flows, and support the occupancy rate, the REIT will likely benefit from developing mixed-use properties. With a solid pipeline of mixed-use projects and ample underutilized land, the company is well-positioned for solid growth and enhancing its shareholders’ value through regular payouts. 

Additionally, the REIT predominantly carries fixed-rate debt, providing insulation against high interest rates. 

The bottom line 

SmartCentres’ top-quality real estate portfolio and momentum in retailer demand are likely to drive its occupancy, retention rate, and rents. Further, the development of its mixed-use properties and a large land bank augur well for future growth and payouts. 

Investors looking for monthly passive income could find SmartCentres REIT a valuable addition to their investment portfolio. Further, based on its current monthly payouts, purchasing 1,000 shares of SmartCentres REIT could help you make $154/month. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends SmartCentres Real Estate Investment Trust and Walmart. The Motley Fool has a disclosure policy.

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