The Bank of Canada recently started slashing interest rates for the first time in over four years, with more cuts expected in the near future. The central bank’s decision is mainly aimed at stimulating the economy amid easing inflationary pressures. This move has fueled a spectacular rally in stocks, taking the S&P/TSX Composite benchmark to new heights in July 2024.
As lower interest rates are likely to boost the economy, several sectors could benefit from this move. One of them is the real estate sector, which can benefit from lower mortgage rates and higher demand for properties. A reliable way to invest in this sector is through real estate investment trusts (REITs), which own and operate various types of properties and pay regular dividends to shareholders.
In this article, I’ll highlight one of the best monthly dividend stocks from the real estate sector you can buy today and hold to expect monthly passive income for years to come. Let’s take a closer look.
SmartCentres REIT stock
SmartCentres REIT (TSX:SRU.UN) is a Vaughan-headquartered company with a market cap of $3.4 billion. The REIT mainly focuses on retail real estate and owns one of the largest and most conveniently located portfolios of shopping centres across Canada. It has total assets of around $11.9 billion, with 35.1 million square feet area of income-producing properties.
This REIT’s share prices currently trade at $23.77 per share after witnessing over 8% gains so far in July 2024. A recent reduction in interest rates in Canada is seemingly helping SmartCentres regain investors’ confidence, driving its share prices higher. The stock offers an attractive 7.8% annualized dividend yield at the current market price and distributes these dividend payouts on a monthly basis.
Analyzing its financial growth trends
No matter how good a company’s future growth prospects look, you should never invest in it without carefully analyzing its financial growth trends, which could give you an idea of how sustainable its cash flows and dividends are. And SmartCentres REIT will not disappoint you on this front.
After COVID-19-related restrictions affected its revenue growth in 2020 and 2021, the trend turned positive again in 2022. In 2023, SmartCentres REIT reported a 3.8% YoY (year-over-year) increase in its total revenue to $834.6 million, with robust leasing activity within its shopping centres. During the year, the REIT maintained an impressive occupancy rate of 98.5%, up from 98.0% the previous year. Continued rent growth also helped it post a 2.2% YoY rise in its same-property net operating income.
This strong growth trend in SmartCentres REIT’s financials continued in the first quarter of 2024 as its quarterly net rental income rose $5.9 million from a year ago due mainly to high traffic in its value-oriented retail spaces.
Strong growth outlook
SmartCentres REIT’s long-term growth outlook looks promising with a robust development pipeline. At the end of the first quarter, the trust was working on roughly 56 million square feet of zoned mixed-use development permissions. It opened a new facility in Whitby earlier this year in March, expanding its self-storage portfolio.
Besides these developmental activities, SmartCentres’s high tenant retention and continued focus on expansion further brighten its growth outlook, making it the reliable Canadian monthly dividend stock to buy now.
