Building an income-producing portfolio requires finding the right investments. And while there are a few options on the market that match the criteria for a 7% dividend stock, some are clearly better than others.
One in particular that can be a real retirement hack for investors right now is Slate Grocery REIT (TSX: SGR.UN). Apart from its impressive 7.8% yield that is paid out monthly, there are more than a few reasons to consider this stock.
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Meet the business behind the monthly payout
For those unfamiliar with the stock, Slate is one of the better-known Canadian REITs. The company owns and operates a portfolio of grocery-anchored properties located in major markets in the U.S.
Collectively, Slate’s portfolio consists of 115 properties. Those properties include not only the primary grocery store anchor tenant, but often several smaller secondary tenants. The secondary tenants are businesses that serve essential needs, such as banks, pharmacies, restaurants, and medical offices.
In other words, they provide a recurring source of traffic to the property in addition to the main grocery anchor.
Grocery stores are attractive anchor tenants because consumers need to purchase food regardless of what happens in the economy. The foot traffic generated from those stores also benefits the secondary tenants.
This gives Slate a defensive business model with a recurring, dependable source of rental income. It makes the REIT’s revenue stream less reliant on non-essential retail such as clothing and electronics stores.
Slate’s portfolio continues to deliver growth
Slate’s portfolio strength was on full display during the most recent quarterly update. In the second-quarter results announced last month, Slate reported completing over 569,000 square feet of leasing during the quarter.
That included renewals that were signed at rates 16.7% above expiring rents. New deals were completed at rates 41% above the comparable average in-place rents.
And despite those attractive rates, Slate’s average in-place rent is still far below the market average of US$24.79 per square foot. In fact, during the most recent quarter, Slate’s average in-place rent was just US$13.10 per square foot.
This means that Slate has a decent long-term runway for future rent increases.
Why this 7% dividend stock appeals to retirees
The main attraction for retirement investors is Slate’s monthly distribution. As of the time of writing, Slate offers a yield of 7.8%. Slate pays a monthly distribution of US$0.072, representing US$0.864 on an annualized basis.
For an investor with $10,000 to throw at Slate, that would generate approximately $777 in annual income, or $64.75 per month.
That monthly payment schedule also simplifies retirement budgeting. Household bills arrive every month, and traditional dividend stocks typically pay investors quarterly. Slate’s monthly distributions align more closely with recurring expenses without needing to divide a quarterly payment across several months.
More importantly, investors who aren’t ready to draw on that income yet can reinvest those distributions to let them continue growing over time.
Is Slate Grocery REIT the ultimate retirement hack?
Slate owns defensive grocery-anchored properties, pays distributions monthly, and offers an ultra-high yield.
That’s not a magical shortcut to retirement, but Slate can make building a reliable income stream a little easier.
In my opinion, Slate is a great fit within a larger, well-diversified long-term portfolio.
Buy it, hold it, and watch your portfolio grow.
