There is something very comforting about getting regular income from your investments, especially when it shows up every single month like clockwork. If you’re looking for that kind of stability, one dividend stock that stands out right now is Slate Grocery REIT (TSX:SGR.UN). This is a Canadian-listed real estate investment trust (REIT) paying a monthly dividend. It focuses on grocery-anchored properties in the United States. So, let’s take a look at why it might belong in your portfolio.
Source: Getty Images
That sweet yield
As of writing, Slate Grocery REIT offers a forward annual dividend yield of approximately 8.6%. The monthly dividend sits at about $0.10 per unit. That means for every 100 shares you own, you get about $10 in cash paid to you every month. For income investors, retirees, or just people looking to offset some expenses with their portfolio, that kind of predictability is very appealing. It also means you don’t have to sell your investments to generate cash flow. This helps your portfolio compound over time if you’re reinvesting.
The reason Slate Grocery REIT can afford to pay such a strong dividend has a lot to do with the kind of properties it owns. Its portfolio is full of necessity-based retail real estate. This includes grocery stores, pharmacies, and other shops people have to visit no matter what is happening in the economy. That foot traffic helps keep occupancy rates high and rent payments steady.
Earnings and income
As of the most recent reporting, Slate Grocery REIT had about $2.23 billion in total assets and about $1.38 billion in total liabilities. That leaves stockholders’ equity at about $673 million. These numbers show that the dividend stock has a solid base of real estate assets backing up those monthly payments. When you’re looking for steady income, you want to know the business you’re investing in has strong foundations, and Slate Grocery REIT checks that box.
The sustainability of its dividend also looks pretty healthy. The current payout ratio sits around 136%. This means the dividend stock is paying out its earnings to shareholders in the form of dividends. It’s not so low that it looks overly conservative, but it’s not dangerously high, either.
Foolish takeaway
Now, no investment is perfect. Slate Grocery REIT is focused entirely on the U.S. market, so it’s exposed to fluctuations in the Canadian-U.S. dollar exchange rate. It also operates in real estate, a sector that can get pressured if interest rates stay high for a very long time. Higher rates can make borrowing more expensive and push down property values. That being said, grocery-anchored retail is one of the more resilient corners of real estate. People cut back on travel and new cars during recessions but still buy groceries.
If I were putting together an income-focused portfolio today, Slate Grocery REIT would be right at the top of my list. With an 8.6% yield paid monthly, a portfolio of essential real estate, and a fairly conservative payout ratio, it fits the bill for steady, reliable income. In short, Slate Grocery REIT is not flashy, but it’s exactly the kind of dependable investment that can make a big difference over time. And right now, when everyone is still a little jittery about where markets and interest rates are headed, there is a lot to be said for investments that just quietly do their job month after month.
