Yahoo Finance Is Smart REIT Still a Smart Buy?
Smart REIT (TSX:SRU.UN) is a terrific company with a bountiful 5.3% dividend yield. The stock pulled back by over 22% in the latter part of 2016 due to fears of rising interest rates. The company owns 140 shopping malls across Canada and has over $8.6 billion worth of assets.
The company has 72% of its shopping centres anchored by Wal-Mart Stores, Inc. (NYSE:WMT). There?s no question that this anchor has driven huge amounts of traffic in the past and will continue to over the next few years. Wal-Mart gives Smart REIT the competitive edge over its peers in the retail-focused REIT space. But is there reason to be concerned over the recent underperformance of the shares of Wal-Mart?
It?s no mystery that Amazon.com, Inc. (NASDAQ:AMZN) is making life very difficult for retail giants like Wal-Mart. There is a ridiculous amount of competition eating into the company?s earnings. Warren Buffett recently disposed of a huge stake of his Wal-Mart shares. Is this something that Smart REIT shareholders should be worried about?
Will Amazon cause Wal-Mart to shut down a large amount of its stores over the next five years?
I don?t believe there is any reason to panic if you?re a Smart REIT shareholder. Wal-Mart will still be around for many years down the line, even as Amazon continues to steal the retail giant?s market share. Wal-Mart is fighting back with its own e-commerce site and has been taking steps to increase its online sales. Wal-Mart is very well positioned to give Amazon a good fight for its money, and I don?t believe Wal-Mart stores will be shutting down across Canada anytime soon.
Some consumers just don?t like to shop online. There?s something enticing about going to a mall and seeing the goods that you?ll be buying and testing the items out before you actually hand over your money. Wal-Mart is a fantastic brand that will always drive traffic to its physical stores, and Amazon won?t change this anytime soon.
What about valuation?
The stock currently trades at a 13.9 price-to-earnings multiple, a 1.3 price-to-book multiple, and a 6.9 price-to-sales multiple, all of which are in line with the company?s five-year historical average multiples of 14.9, 1.3, and 6.7, respectively.
There?s no question that the stock isn?t as cheap as it was a few months ago, but I still believe it offers an attractive yield at a fair valuation for the average income investor.
The dividend is slightly lower than its historical average yield of 5.5%, so I would recommend waiting for another pullback, so you can get a yield of 5.5% or more.
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Fool contributor Joey Frenette has no position in any stocks mentioned. David Gardner owns shares of Amazon.com. The Motley Fool owns shares of Amazon.com.
Dividend Investor Canada is having its Grand Opening!
Your invitation is waiting! In celebration of this historic event you're invited to discover the secret behind an amazing success story.
Motley Fool Canada's first-ever dividend-focused stock-picking service is finally open to investors like you -- for the next few days only! You're invited to join and lock in a special Charter Member discount and bonus perk when you do.
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Fool contributor Joey Frenette has no position in any stocks mentioned. David Gardner owns shares of Amazon.com. The Motley Fool owns shares of Amazon.com.
