Written by Sneha Nahata at The Motley Fool Canada
Investing in monthly dividend stocks holds a strong appeal for various reasons. Mainly, it is beneficial for investors relying on their investments to cover their living expenses, such as retirees. These stocks not only cater to the needs of retirees but also aid in effective budgeting and cash flow management. Thus, they are an attractive option for those seeking regular passive income.
It’s important to highlight that the advantages of monthly dividends extend beyond consistent income, as they also offer investors increased liquidity and flexibility. Additionally, many of these dividend-paying companies possess the potential for long-term capital gains, providing a dual benefit of regular income and sustained growth over time.
Fortunately, the TSX has several fundamentally strong companies that distribute dividends every month. Moreover, some of them also offer attractive and well-protected yields. One noteworthy example is SmartCentres Real Estate Investment Trust (TSX:SRU.UN). Let’s explore this company further.
SmartCentres: The 8% dividend stock pays cash every month
SmartCentres is a REIT (real estate investment trust). Like its peers, it must distribute most of its earnings, making it a compelling investment to generate regular cash. Despite its very high payout ratio, SmartCentres is a reliable bet as it has a history of consistently paying and, in between, growing its dividends for years.
What stands out is that this REIT offers a lucrative dividend yield of over 8% (based on its closing price of $23.09 on November 30).
Why to invest in SmartCentres REIT
Besides offering enticing yield, SmartCentres is Canada’s leading fully integrated REIT, which owns resilient real estate assets that drive its adjusted funds from operations (AFFO) in all market conditions. This enables the company to cover its payouts well and enhance its shareholders’ return via consistent dividend payments.
For instance, SmartCentres has 191 properties, with a significant focus on retail assets. These properties are strategically positioned in prime locations throughout Canada and witness strong demand. Further, in terms of scale, SmartCentres commands an impressive $12 billion in assets and boasts a substantial 35 million square feet of gross leasable mixed-use space.
What truly sets SmartCentres apart is its exceptional tenant base and remarkable occupancy rate. A notable 65% of its tenants provide essential services, with an impressive 95% representing national or regional brands. Notably, a significant portion of SmartCentres’s income is generated from its partnership with Walmart, and its top 25 tenants collectively contribute 75% of its cash flows.
The REIT’s solid tenant base plays a crucial role in stabilizing cash flows, resulting in a consistently high occupancy rate. SmartCentres’s core retail portfolio, boasting a remarkable 98.5% occupancy rate, continues to perform well. Moreover, its mixed-use development program continues to grow and deliver strong results.
SmartCentres’s strength lies in its recurring core retail income, solid mixed-use development program, formidable tenant base, and sustained high occupancy rate. The company is well positioned to generate solid AFFO and enhance its shareholders’ value through regular monthly payouts. Additionally, SmartCentres could easily navigate the challenges arising from rising interest rates as most of its debt is fixed rate.
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Motley Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends SmartCentres Real Estate Investment Trust and Walmart. The Motley Fool has a disclosure policy.