What’s better than a high-yielder with a generous (and sustainable) dividend payout? One that pays on a monthly basis instead of quarterly. In this piece, we’ll check in on a REIT (real estate investment trust) that has an attractive distribution that’s on a stable footing and stands to grow at an above-average pace over the next decade. Enter shares of real estate play REIT SmartCentres REIT (TSX:SRU.UN), which currently sports an impressive 6.8% yield at the time of this writing.
While the yield is the main attraction for many, I think it’s the long-term capital gains potential that stands out for investors who also care about capital upside potential. Most often, it’s the capital gains potential that’s forgone when one reaches a bit higher for yield. In the case of SmartCentres REIT, however, I think there’s an opportunity for investors to get a decent (though not shocking) gain over time alongside that supercharged yield. While there are higher yielders out there in the REIT waters, very few seem to check all the boxes for stability, yield, and growth.
A steady high-yielder to play some defence
Shares of SRU.UN has actually been quite choppy over the past year (especially for a REIT), but it’s the lower degree of correlation (0.87) that I’d look for if you’re looking beyond stocks for yields. Over the past year, shares have risen nearly 10%. That’s a decent, but still TSX-trailing result. Still, if you think interest rates will move lower (there’s a strong case for this, in my opinion), I think the steady retail REITs like SmartCentres are worth sticking with for the long haul.
In any case, strip mall REITs definitely aren’t an exciting place to be these days, especially with the rise of AI and agentic shopping. And as uneventful as SmartCentres may seem, there is a powerful force that makes the high-yielder such a great bet, even in times of recession. SmartCentres REIT is pretty much the landlord for many Canadian Walmart locations. Undoubtedly, Walmart has been quite the force in retail on both sides of the border.
Walmart and the SmartLiving push make SmartCentres the ultimate retail REIT
With its low prices, foot traffic is bound to stay stronger for longer, especially as many Canadians look to spend less this year. Of course, shopping at places like Walmart can make it easier to stay on budget. And with that, SmartCentres’s other tenants will also benefit as more traffic flows through its Walmart-anchored strip malls.
When it comes to brick-and-mortar retailers, it really doesn’t get more powerful than Walmart. If a recession were to hit this year or next, SmartCentres’ payout looks incredibly durable. It’s not just the recession-resilient traits that make me a big fan of the REIT, though; it’s the push into residential real estate.
With its “SmartLiving” expansion, SmartCentres is becoming more of a diversified real estate play. Getting into the apartments, self-storage, and even senior housing, I think, warrants a major multiple re-rating, which, I believe, hasn’t happened quite yet. Of course, SmartCentres’s shift will take some time, and, as a result, it may take many years before investors better appreciate where the REIT is headed. It’s a steady monthly payer with a defensive moat and a very promising growth profile. That makes it a premier pick in the REIT scene.
