A 6.3% Dividend Yield: I'm Buying This TSX Stock and Holding for Decades

A 6.3% Dividend Yield: I’m Buying This TSX Stock and Holding for Decades

Explore the significance of dividend stocks in the Canadian market and discover the strongest dividend contenders.

Puja Tayal

Author Bio

Puja Tayal grew up in a small-business family where dinner conversations often centred on working capital and savings. Her early experiences with investing, particularly during the 2008 financial crisis, shaped her approach to understanding markets and evaluating investment opportunities. She began her career at a mutual fund company before moving into investor education and financial writing for asset and wealth management firms. Before joining The Motley Fool, Puja wrote for Market Realist, where she extensively covered the semiconductor industry. Her published work has also appeared in The Indian Express. Puja believes every stock has a story that can help investors understand its potential returns. She combines business analysis with different investing approaches to help investors make informed decisions and align their portfolios with their long-term financial goals. Outside of finance, Puja enjoys long drives, catching up with friends, watching superhero and science-fiction movies, and managing her family portfolio. She also has a keen interest in artificial intelligence and its potential to reshape the world.

Education

Bachelor's degree in Accounting and Finance, University of Mumbai (2007)
CFA Level I

Areas of Expertise

Qualitative company analysis, management strategy, risk assessment, long-term investing, portfolio diversification and rebalancing, dividend reinvestment, cyclical growth opportunities, compounding strategies, growth stocks, and dividend stocks.

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Favorite Investment Quote

"Risk comes from not knowing what you're doing." — Warren Buffett

Published May 29, 9:45 pm EDT

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.

pregnant mother juggles work and childcare — Source: Getty Images

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.