While the returns are the main attraction for many, I think it’s the long-term capital gains potential that stands out for investors who are also concerned about the upside capital potential. Usually it is the capital gain potential that is lost when one achieves a slightly higher return. In the case of SmartCentres REIT, however, I think there is an opportunity for investors to make a decent (but not shocking) gain over time, in addition to that high return. While there are higher yields in the REIT waters, few seem to be checking all the boxes for stability, yield and growth.
A stable high-yielder to play some defense
SRU.UN stock has been quite choppy over the past year (especially for a REIT), but it’s the lower correlation rate (0.87) that I’d look for when looking beyond stocks. Shares are up nearly 10% in the past year. That’s a decent, but still TSX-lagging result. But if you think rates will fall (there’s a strong case for this in my opinion), I think the stable retail REITs like SmartCentres are worth holding on to for the long term.
Either way, strip mall REITs are certainly not an exciting place to be these days, especially with the rise of AI and agentic shopping. And as boring as SmartCentres may seem, there’s a powerful force that makes the high-yield business such a good choice, even in times of recession. SmartCentres REIT is pretty much the landlord for many Canadians Walmart locations. Without a doubt, Walmart is a major player in retail on both sides of the border.
Walmart and the SmartLiving push make SmartCentres the ultimate retail REIT
Low prices will likely prolong foot traffic, 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’ other tenants will also benefit as more traffic flows through the Walmart-anchored malls.
When it comes to brick-and-mortar retailers, it really doesn’t get more powerful than Walmart. If a recession were to happen this year or next, SmartCentres’ payout looks incredibly sustainable. However, it’s not just the recession-proof features that make me a big fan of the REIT; it is the impetus for residential real estate.
With the “SmartLiving” expansion, SmartCentres is increasingly becoming a diversified real estate play. Moving into apartments, self-storage and even senior housing, in my opinion, warrants a major reappraisal, which in my opinion hasn’t quite happened yet. Of course, the shift away from SmartCentres will take some time, and as a result, it may take many years for investors to better understand where the REIT is going. It is a stable monthly payer with a defensive moat and a promising growth profile. That makes it a leading choice in the REIT scene.
#dividend #play #pays #Single #Month