Written by Chris MacDonald at The Motley Fool Canada
The recovery from the pandemic-induced financial crisis hasn’t been the same across all sectors. Relative to most of the other spaces, real estate investment trusts (REITs) have delivered impressive performance in recent months. Indeed, considering the current market environment, purchasing REITs appears to be a wise move for investors. In that regard, SmartCentres REIT (TSX:SRU.UN) is an excellent option.
Here’s why I think SmartCentres REIT is a top pick in this sector right now.
Earnings stability key for investors
Given SmartCentres’s focus on retail real estate, one might consider this REIT higher risk than its counterparts. Indeed, looking at this company at a high level, that would appear to be the case.
Retail-oriented businesses are seeing tremendous disruption from secular trends tilted toward e-commerce. Indeed, investors buying into physical retail businesses may be uneasy about doing so right now.
However, SmartCentres REIT boasts some of the highest-quality blue-chip tenants among its clientele. Walmart, for example, anchors a significant percentage of the company’s real estate holdings. Those bullish on the ability for big-box retail to not only survive but thrive will like SmartCentres’s positioning right now.
Additionally, the company’s vacancy rate is near zero right now. This is a company that’s minting cash flow at a time when many other REITs are having a difficult time. That says something.
Accordingly, I view SmartCentres as one of the best retail-focused REITs out there right now.
SmartCentres REIT has a portfolio of high-quality assets
Sticking on the quality discussion for a second, SmartCentres REIT has an impressive portfolio of properties. These properties are focused in Canada, but the company is looking at expanding further abroad.
Given the strong anchoring of SmartCentres’s retail portfolio, I think this is a REIT with a great long-term outlook. Add to this fact the trust’s dividend yield of 6.2%, and investors have a real winner on their hands.
The company’s cash flow stream is highly stable, with approximately 25% of the company’s net rental income coming from Walmart alone. Indeed, in any economic environment, I see SmartCentres excelling relative to its peers. Accordingly, this company remains a stock that continues to top my watch list right now.
SmartCentres’s portfolio of assets represents tremendous long-term growth potential. Moreover, this REIT offers a mouth-watering dividend yield that’s much higher than its peers’ yields right now.
Accordingly, investors seeking stable long-term total returns ought to consider this top REIT.
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Fool contributor Chris MacDonald has no position in any stocks mentioned. The Motley Fool recommends Smart REIT.