High-yielding investments can be tempting, but there is usually a reason the market is offering investors so much income. A falling share price can push yields higher, while concerns about the underlying business can make an attractive distribution look riskier than it first appears.
That does not mean every high-yield stock should be avoided. Sometimes, weaker market sentiment can give investors an opportunity to buy a solid business while locking in more passive income.
SmartCentres Real Estate Investment Trust (TSX: SRU.UN) is one investment I keep coming back to for that reason. The REIT has faced some pressure in recent months, pushing its distribution yield up to around 6.9%. However, the fundamentals behind the business still look surprisingly resilient.
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SmartCentres REIT
SmartCentres is one of Canada’s largest real estate investment trusts. Its portfolio includes roughly 200 strategically located properties across the country, with approximately $12.1 billion in assets and 35.5 million square feet of income-producing retail and office space.
Retail real estate might not sound like the safest place to invest when consumers are feeling pressure from a higher cost of living. However, SmartCentres is not the typical owner of struggling malls packed with discretionary retailers.
Many of its properties are anchored by Walmart. That matters because stores selling groceries and other everyday essentials can continue attracting steady customer traffic even when households become more careful with their spending. The Motley Fool reference also notes that Walmart anchors more than half of SmartCentres locations.
That kind of tenant base provides the REIT with a degree of stability that many retail landlords simply do not have.
The latest numbers reinforce that strength. SmartCentres ended the second quarter of 2026 with in-place and committed occupancy of 98.1%, up from the previous quarter. It also leased around 247,000 square feet of vacant space during the quarter, while rent growth on lease extensions excluding anchor tenants came in at 12%.
For a retail-focused REIT operating in an uncertain economy, those are encouraging numbers.
Why I keep coming back
The biggest attraction today is obviously the income.
SmartCentres pays investors $0.15 per unit each month. That works out to approximately $1.85 per unit annually and, at current levels, translates to a dividend yield of around 6.9%.
Technically, REITs pay distributions rather than conventional corporate dividends. However, for investors looking to generate regular passive income, the end result is similar: SmartCentres puts cash into investors’ accounts every month.
A high yield would mean very little if the properties behind it were struggling. Fortunately, SmartCentres still has several growth opportunities beyond its existing retail portfolio.
The REIT has been expanding into areas including purpose-built rentals, self-storage, and other mixed-use developments. Two new self-storage facilities partially opened in Quebec during the second quarter, while additional locations are under construction in British Columbia and Alberta.
That development pipeline gives SmartCentres another route for long-term growth instead of relying entirely on rent increases from its existing properties.
Of course, there are risks. Real estate investment trusts are sensitive to interest rates because developing and owning properties usually requires substantial debt. A weaker economy can also hurt tenants, while prolonged weakness in consumer spending can create problems for retail landlords.
SmartCentres is not immune to those risks. However, near-full occupancy and a tenant mix built around necessity-based retailers give it a better defensive position than many investors might expect from a retail REIT.
Foolish takeaway
A 6.9% yield is high enough to catch my attention, but yield alone is never a good enough reason to own an investment.
What makes SmartCentres more interesting is the business supporting those distributions. Its properties remain almost entirely occupied, Walmart anchors a large portion of the portfolio, rents continue to grow, and management is creating additional growth opportunities through new developments.
The units might not produce explosive capital gains, and a difficult real estate market can continue creating volatility in the near term. Still, investors are currently being paid an attractive amount of income while they wait.
For investors seeking reliable passive income, that combination is difficult to ignore. With its 6.9% yield and resilient property portfolio, SmartCentres REIT is one high-yield investment I would keep coming back to.
