When it comes to real estate investment trusts (REIT), there are a few sectors that seem to simply be consistently one thing: boring. But you know what? I love boring. Boring means predictable. And if there’s one thing in this world that’s as predictable as the sun rising, it’s food.
That’s why today we’re going to look at the safety and security of grocery REITs, and one that belongs on practically every single one of our watchlists. So let’s get into it.
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Why grocery REITs
Grocery REITs might be overlooked, but can be a quiet growth engine for investors wanting stability and long-term growth. The core of this stability comes from resiliency. Grocery stores are essential, as we saw during the pandemic. People need food no matter what the economy is doing. That makes these grocery-anchored real estate properties less volatile than other sectors, such as office and retail REITs where tenant turnover is higher.
Furthermore, even during downturns grocery tenants remain strong anchors. Foot traffic remains steady, supported by retailers. For landlords, this means investors get reliable rental income and lower vacancy risk. And this can equal growth when opportunities come along, as well as with consistent dividend payouts.
Now, let’s talk about growth for a second. When it comes to structuring leases and the evolving nature of groceries, these properties and the long-term leases have built-in growth. That’s because many of the rents are tied to inflation. On top of this, e-commerce has reshaped retail, including groceries. These properties adapted by blending traditional grocery shopping with online delivery and pickup. Properties with well-known brands and strong locations can drive higher growth, serving as shopping as well as logistics hubs. All driving long-term value.
Consider SGR
Now let’s get into a REIT that supports all these points. Slate Grocery REIT (TSX: SGR.UN) is a strong option for those seeking high income as well as stability, with long-term growth built in. To start, SGR has a standout dividend yield of 8.3% as of writing. This is well above the average yield of Canadian REITs, backed by durable cash flow from its grocery properties.
That durability is seen in an occupancy rate at a healthy 94%. Renewables are also being signed at nearly 14% above prior rents, with new leases close to 29% higher! This shows properties remain in demand, and management is capturing strong rental spreads. So this protects the dividend and allows higher future payouts. Right now, even a $7,000 investment could bring in annual dividends of $573, or $47.75 a month!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| SGR.UN | $14.54 | 482 | $1.19 | $573 | Monthly | $7,012 |
What’s more, the REIT continues to manage a conservative balance sheet. Only 12.3% of its total debt matures through 2026, and refinancing has been secured at favourable terms. Therefore, there’s no immediate refinancing risk to pressure cash flow. And with same-property net operating income (NOI) at 3.6%, operating performance remains a highlight.
Bottom line
If you’re an investor looking for stability, passive income, and growth, then SGR remains a strong option. It may not make massive headlines, but the quiet compounder can still be a big win in any portfolio. With grocery-anchored real estate remaining a resilient option, the REIT is a strong and reliable choice for anyone seeking long-term dividends.
