Investing in quality monthly dividend stocks can help you easily start a low-cost passive-income stream. However, it’s essential to identify and invest in businesses that are positioned to generate cash flows across business cycles.
In this article, I have identified one such TSX dividend stock that pays cash every single month and offers you a dividend yield of 8.6%. Valued at a market cap of $821 million, Slate Grocery (TSX:SGR.UN) is an owner and operator of grocery-anchored real estate south of the border.
The real estate investment trust (REIT) owns over $2.4 billion of real estate infrastructure across major U.S. metro markets that communities rely on for their everyday needs. The REIT’s resilient grocery-anchored portfolio and strong credit tenants provide shareholders with durable cash flows and the potential for capital appreciation over the longer term.
Is the monthly TSX dividend stock a good buy right now?
Slate Grocery REIT, a grocery-anchored retail landlord, reported strong fourth-quarter (Q4) results that highlighted significant leasing momentum and solid operational performance in a market that continues to favour landlords.
It reported same-property net operating income (NOI) growth of 4.3% on a trailing 12-month basis, driven by robust leasing activity at double-digit rental spreads over the past seven consecutive quarters.
“Strong leasing activity at high rental spreads over the last several quarters continued to drive net operating income growth for the REIT,” said Blair Welch, chief executive officer, during the company’s earnings call. “The REIT completed close to three million square feet of total leasing throughout the year at double-digit rental spreads.”
New lease deals were completed at 28% above comparable average in-place rents, while non-option renewals were executed at more than 14% above expiring rents. Portfolio occupancy remained stable at 94.8%, with executives expecting their pipeline of new leasing opportunities to support a continued positive trend in occupancy in the coming quarters.
Slate Grocery explained that a constrained supply environment continues to work in their favour. For instance, retail construction completions in Q4 totalled four million square feet, the lowest quarterly total in more than a decade. This limited new supply is giving retail landlords significant pricing power.
“The constraints on new supply continue to limit the overall retail availability rate. The resulting competition for limited space and high demand for prime locations continue to give retail landlords pricing power,” Welch explained.
What’s next for this TSX dividend stock?
Executives noted that their average in-place rent of $12.65 per square foot remains well below the market average of $23.80, providing a significant runway for continued rent increases and NOI growth, even in a more challenging financing environment.
Slate Grocery successfully financed over $630 million of debt throughout the year at favourable terms, which management attributed to lender confidence in their business model despite broader market challenges in commercial real estate financing.
Looking ahead, the REIT expects transaction activity to increase in 2025, following a muted environment over the past two years. Connor O’Brien, managing director, noted that CBRE (Coldwell Banker Richard Ellis) is forecasting about $10 billion of open-air retail transactions this year.
Analysts remain bullish and expect the TSX stock to gain over 20% in the next 12 months. After adjusting for dividends, cumulative returns could be closer to 30%.
