Dividend stocks are the strength of the Canadian stock market. Several businesses that have stood the test of time, withstood crisis, and expanded with robust debt management have emerged as dividend stalwarts. Most dividend stalwarts rode the bull rally after four years of a bear run, diluting their dividend yields. However, one TSX stock still has a dividend yield of over 6% and is a keeper.
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The 6.3% dividend stock to hold for decades
Canada’s biggest strengths are its oil sands fields, energy exports to the United States, and real estate. The geopolitical environment and energy supply shock have pushed Canadian energy stocks to their new highs. However, the real estate sector is still in the recovery stage after the 2022 house price correction. At that time, all REITs posted a loss on the fair market value of properties, which reduced their unit price.
SmartCentres REIT (TSX: SRU.UN) was a great value stock then, as it traded at $22 per unit. The unit price has recovered to the average price of $29 and above. The moat of SmartCentres REIT is its agreement with Walmart in 1999 to build stores around Walmart and convert them into shopping centres. Since then, SmartCentres has increased its share of Walmart-anchored stores in the rental income. The next phase of growth began in 2016 with a mega intensification project to convert shopping centres to city centres.
SmartCentres first started building commercial properties and self-storage facilities. In 2019, it started building residential buildings, condos, and townhouses, which it builds and sells. The sales proceeds go into repaying debt. Its adjusted debt is 9.8 times its adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). It has $5.7 billion in debt against $5.2 billion in equity.
The debt is high, as most of it is used in development projects. Around 14% of SmartCentre’s property assets are in development. This presents risk, but also significant growth potential as the REIT sells condos and townhouses and rents stores, apartments, and offices. SmartCentres is managing this debt strategically by keeping sufficient money to pay the interest.
Investing in SmartCentres REIT
The significant amount of development projects not generating any income did stretch the REIT’s finances, but it paid dividends. Its payout ratio has now reduced to 86.4% of its adjusted funds from operations in the first quarter of 2026 as it delivers projects. This ratio will reduce, and the debt ratio will improve with every new project completion.
You could consider investing in the REIT and holding it for decades as the intensification project unfolds and brings in new and diversified sources of rental income.
SmartCentres is among the few REITs that have a 21-year dividend-paying history without a dividend cut. A key reason for this stability is its biggest tenant, Walmart. Be it a pandemic or Global Financial Crisis, people will keep buying from Walmart. Its stores are sticky, which means SmartCentres doesn’t have to restructure its property portfolio much. All these signs make this TSX stock a buy and hold for decades.
