Retirement planning is one of the most important financial challenges Canadians face, and for those turning 65 today, the stakes are especially high. The amount needed to retire comfortably depends on lifestyle choices, healthcare needs, and inflationary pressures, but most experts estimate that around $1 million in savings is the benchmark.
This amount allows for a safe annual withdrawal of $40,000 to $60,000, supplementing government benefits like the Canada Pension Plan (CPP) and Old Age Security (OAS). Yet, many Canadians find themselves short of this goal, making the need to catch up all the more urgent. For those in this situation, investments in high-quality, dividend-paying real estate investment trusts (REITs), such as SmartCentres Real Estate Investment Trust (TSX:SRU.UN), can provide a practical and reliable solution.
SmartCentres
SmartCentres REIT is a powerhouse in the Canadian real estate investment landscape. With a portfolio heavily anchored by Walmart and diversified across retail and mixed-use properties, SRU.UN offers a steady and predictable stream of income, making it ideal for retirees or those playing catch-up on their savings. At a current trading price of $25.62 and a 7.13% dividend yield, it provides one of the highest yields in its sector. For every $10,000 invested, retirees could earn $713 annually in dividends — a meaningful boost to passive income, particularly in today’s volatile market.
The most recent earnings highlight SmartCentres’s resilience in challenging market conditions. Revenue came in at $994.45 million, reflecting the REIT’s ability to generate significant income even in an environment of high interest rates and cautious consumer spending. While quarterly revenue growth year over year fell by 11.10%, this is largely a reflection of broader macroeconomic headwinds rather than any weakness in SmartCentres’s core operations. The REIT maintained a robust operating margin of 54.61%, a testament to the efficiency of its property management.
Historically, SRU.UN has demonstrated remarkable stability and resilience. Over the past five years, its dividend yield has consistently hovered around the 7% mark, a clear signal of its management’s commitment to delivering value to shareholders. This stability has helped SRU.UN stand out in a competitive REIT sector, offering investors predictable income in an unpredictable world. Furthermore, the stock’s price-to-book ratio of 0.85 suggests that it is undervalued.
Future outlook
Looking ahead, SmartCentres’s future outlook is equally promising. The REIT has been actively diversifying its portfolio beyond traditional retail into residential and mixed-use developments. This strategic pivot positions it well to capture growth opportunities in urban centres as more Canadians seek flexible living and working spaces.
One of the most appealing aspects of SmartCentres for retirees is its dividend consistency and reliability. Its current payout ratio of 236.82% might appear high, but this is typical for REITs, which are required by law to distribute most of their taxable income to shareholders. For retirees, this translates into a dependable source of income to fund everyday expenses, travel, or healthcare costs.
SmartCentres’s management has also shown a strong ability to navigate economic uncertainties. Despite the pressures of rising interest rates and fluctuating consumer confidence, the REIT continues to deliver strong operating performance. Its levered free cash flow of $560.66 million for the trailing 12 months highlights its ability to cover dividend payments while maintaining financial flexibility. This reliability is crucial for retirees who cannot afford the volatility associated with higher-risk investments.
Bottom line
Ultimately, retirement is about more than just reaching a financial target. It’s about peace of mind. For those who feel behind on their savings, investments like SmartCentres can help bridge the gap. Providing both income today and the potential for growth tomorrow. By investing in SRU.UN, Canadians can take a meaningful step toward financial security, enabling them to focus on enjoying their golden years without the stress of financial uncertainty.
