A 7.3% dividend yield is a lucrative investment for those seeking immediate income. If you have received a significant sum of money – from the sale of an asset, maturing of a term deposit, a bonus, a commission – and are looking to make it last, a dividend stock is a good option. This 7.3% dividend-yielding stock can earn you a monthly income from your investment. Your invested amount may fluctuate as the stock price moves 15–20%, but the chances of an upside are greater. Here’s why.
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The 7.3% dividend stock
The dividend stock in discussion is Canada’s largest retail real estate investment trust, SmartCentres REIT (TSX: SRU.UN). It is among the oldest REITs in Canada and the one that has withstood the 2008 financial crisis.
The REIT’s strengths:
- Over 80% of its real estate assets are unencumbered, which means they have no liability.
- It leases 40% of its gross leasable area to Walmart.
- The REIT has diversified into mixed-use assets, including commercial, residential, and storage facilities. It is building these assets around its retail stores, which could intensify the value of its stores and help it earn more rent.
Walmart has a sticky business, which means rent from that retailer keeps flowing. Since 80% of its assets are unencumbered, it has the flexibility to take loans against them in difficult times and withstand crises.
Grab the 7.3% dividend yield before it’s gone!
Last year, SmartCenters REIT was in a difficult situation. Its occupancy rate fell to 97.7% in the first quarter of 2024. The REIT reported a net loss as the fair market value of its properties fell. It was paying 118% of its funds from operations in distributions.
However, the REIT sustained the crisis. When the Bank of Canada started cutting interest rates, the real estate market saw a recovery. Its occupancy rate improved to 98.4% in the first quarter of 2025. Lease renewals and new leases increased rental income.
Falling interest rates made borrowing affordable, which revived the property market. SmartCentres REIT’s loss from the fair market value of the property was reduced. The REIT’s net asset value per unit stood at $35.51 as of March 31, 2025, and the unit is trading at a 28.7% discount.
If you buy the REIT units while they still trade at a discount, you can lock in a 7.3% yield. The yield is the annual dividend per unit, as a percentage of the unit market price. As the property value recovers, the REIT’s unit price will also appreciate, and you will lose out on the 7.3% yield.
The REIT has been paying distributions for 21 years and slashed distributions only once in 2004. The last five years have been difficult for the REIT as shops closed during the pandemic, real estate prices soared significantly in 2021, but rental income remained low. In 2022, rental income increased, but property prices fell. At a time when other REITs slashed distributions, SmartCentres REIT paused dividend growth to withstand these challenges, showing its resilience to economic situations.
You can consider this stock for a regular monthly passive income.
How to maximize your returns from this 7.3% yield
Suppose you invest $10,000 in SmartCentres REIT. You could buy 395 units and earn $60.90 every month. This amount may be small, but you are getting it by doing nothing – no property tax, maintenance charges, or marketing expenses incurred to find tenants. In fact, the rent from residential property is somewhere between 2.5% and 3.5% of its fair market value. That makes a 7.3% yield a grab.
You can use the distribution money to buy another growth or dividend stock every month, thereby compounding your returns. There are multiple stocks under $60 to consider: Enbridge for dividends, Magna International for a cyclical rally, or the iShares S&P/TSX Capped Information Tech ETF for growth.
