Are you new to investing? Then you’re likely into it because of headlines, and that can be a bit unfortunate. But hopefully you’ve come to this article because you’re looking for something different. You’re not looking for the latest meme stock craze or even a growth stock. You want a stock that can offer up dividends quarter after quarter or even month after month. The most likely place to find these stocks is with real estate investment trusts (REITs).
REITs in Canada must pay out 90% of taxable income to their shareholders, and that usually comes in the form of dividends. That’s why these are some of the top choices for investors looking for income they can use for groceries, bills, or even to reinvest! It’s the best way to create a secret income machine, while also preparing for the future. So, let’s look at one solid option.
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SmartCentres
If you’re looking for a smart investment, then it doesn’t get much smarter than SmartCentres REIT (TSX:SRU.UN). SRU is a fully integrated REIT that mainly focuses on retail, but it has been expanding in the last few years to mixed-use and development properties across Canada.
Part of its appeal is its partnership with major brand names. For instance, Canadians will find that most locations of SmartCentres will include a Walmart as well as Dollarama, two chains that maintain strength no matter what the market does.
With about 195 properties at writing, $12 billion in assets, and 35.3 million square feet of leasable space, the REIT is nothing if not impressive. Furthermore, its strategic locations can serve about 90% of the Canadian population within a 10-km radius.
Into earnings
The strength of the REIT can be seen over and over again in its earnings. With a market cap of $4.61 billion, the dividend stock has been climbing back from its 52-week low of $23, and it is now near its high at $27 per share.
Times have been tough on a macro level, and this has affected earnings a bit. The trust reported a decline in quarterly revenue growth year over year by 9.5%, with earnings dropping by 15.3%. Yet the dividend stock showed it’s controlling its costs compared to income, with a profit margin at 24.31%.
While the REIT carries debt of $5.16 billion and a debt-to-equity (D/E) ratio of 82% at writing, the company has been bringing down debt over the years. In fact, its operating cash flow stands at $386.7 million and leveraged free cash flow at $238.17 million, showing it can maintain cash flow and still service its debt.
Value and income
The other reason to consider this dividend stock? It’s valuable. The REIT trades at 20.02 times earnings, with a forward price-to-earnings (P/E) of 13.51. This shows investors expect more growth in the future, all while maintaining its dividend.
And that dividend looks great. The company offers a whopping 6.84% dividend yield. While the payout ratio is higher at 137%, that’s not unusual for a REIT like SmartCentres — especially to maintain its shareholders. Right now, investors putting $7,000 aside could bring in income of about $40 each and every month, or $489 annually!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| SRU.UN | $26.78 | 261 | $1.85 | $483.85 | Monthly | $6,991.58 |
Bottom line
SmartCentres might be a bit of a mixed bag in terms of volatility, opportunity, and risk and reward for new investors. However, that high dividend is mighty enticing, and with growth already underway, now could be the time to get in on the stock — especially since the more you own it, the more income you can collect.
