Monthly Dividend Stock In Focus: SmartCentres Real Estate Investment Trust

Updated on April 1st, 2025 by Felix Martinez

SmartCentres Real Estate Investment Trust (CWYUF) has three appealing investment characteristics:

#1: It is a REIT so it has a favorable tax structure and pays out the majority of its earnings as dividends.
Related:  List of publicly traded REITs

#2: It is a high-yield stock based on its 7.3% dividend yield.
Related: List of 5%+ yielding stocks

#3: It pays dividends monthly instead of quarterly.
Related: List of monthly dividend stocks

There are currently just 76 monthly dividend stocks. You can download our full Excel spreadsheet of all monthly dividend stocks (along with metrics that matter, like dividend yield and payout ratio) by clicking on the link below:

SmartCentres Real Estate Investment Trust’s trifecta of favorable tax status as a REIT, a high dividend yield, and a monthly dividend make it appealing to individual investors.

But there’s more to the company than just these factors. Keep reading this article to learn more about SmartCentres Real Estate Investment Trust.

Business Overview

SmartCentres Real Estate Investment Trust is one of the largest fully integrated REITs in Canada. Its best-in-class portfolio consists of 195 strategically located properties in every province across the country. SmartCentres REIT has $11.9 billion in assets and owns 35.3 million square feet of income-producing, value-oriented retail space with 98.7% occupancy on owned land across Canada.

Source: Investor Presentation

SmartCentres REIT faces a secular headwind, namely consumers’ shift from traditional shopping to online purchases. This trend has remarkably accelerated since the onset of the coronavirus crisis, hurting many retail REITs.

However, SmartCentres REIT enjoys a key competitive advantage, namely the strong financial position of its tenants. The REIT generates more than 25% of its revenues from Walmart and more than 60% of its revenues from financially strong tenants, which offer essential services. This is a major competitive advantage, as it makes the REIT’s cash flows reliable and resilient to economic downturns.

The company reported strong financial and operational results for the fourth quarter of 2024. The company achieved a five-year high occupancy rate of 98.7%, with rental growth of 8.8% excluding anchors and 6.6% overall. Cash collections exceeded 99%, and same-property NOI rose 3.8% overall and 6% excluding anchors. Total NOI increased $12.3 million (9%), while FFO per unit fell to $0.53 from $0.59 due to a fair value adjustment. Adjusted FFO grew 9.8% to $0.56 per unit.

The company maintained its $1.85 per unit annual distribution with a 91.7% payout ratio. Adjusted debt to EBITDA improved to 9.6x, while the debt-to-assets ratio rose slightly to 43.7%. Liquidity stood at $833 million, with an unencumbered asset pool of $9.5 billion. The weighted average interest rate decreased to 3.92%, down 17 basis points.

Challenges include a short 3.1-year average debt maturity, which poses refinancing risks. Despite securing 9.8 million square feet of development approvals in 2024, market conditions could impact execution. The company expects 2025 same-property NOI growth to be at the lower end of its 3%- 5% guidance.

Growth Prospects

SmartCentres REIT can boast of having a defensive business model, thanks to the high credit profile of its tenants. On the other hand, REITs have failed to grow their FFO per unit over the last decade, as their bottom line has remained essentially flat.

It is important to note that the lackluster performance record has resulted primarily from strengthening the USD vs. CAD. As the Canadian dollar has depreciated by about 30% over the last decade, it is obvious that SmartCentres REIT has grown its average FFO per unit by about 2.7% per year in its local currency over the last decade.

Source: Investor Presentation

More precisely, SmartCentres REIT has 179 initiatives related to recurring income and 95 initiatives related to intensifying existing properties. Therefore, the REIT’s future looks brighter than it has in the past decade.

On the other hand, central banks are raising interest rates aggressively to cool the economy and thus restore inflation to its normal range. Higher interest rates are likely to significantly increase the interest expense of SmartCentres REIT, which is an important headwind to consider going forward.

Given SmartCentres REIT’s promising growth prospects but also its lackluster performance record, currency risk, and the headwind from high interest rates, we expect the REIT to grow its FFO per unit by about 2.0% per year on average over the next five years.

Source: Investor Presentation

Dividend & Valuation Analysis

SmartCentres REIT is currently offering an above-average dividend yield of 7.3%. It is thus an interesting candidate for income-oriented investors but the latter should be aware that the dividend may fluctuate significantly over time due to the gyrations of the exchange rates between the Canadian dollar and the USD.

Moreover, the REIT has an elevated payout ratio of nearly 100%, significantly reducing the dividend’s safety margin. On the bright side, thanks to its defensive business model and strong interest coverage ratio, the trust is not likely to cut its dividend in the absence of a severe recession. Nevertheless, investors should not expect meaningful dividend growth going forward. They should know that the dividend may be cut during an unforeseen downturn, such as a deep recession. We also note that SmartCentres REIT has a material debt load on its balance sheet.

In reference to the valuation, SmartCentres REIT has traded for 15.5 times its FFO per unit in the last 12 months. Given the REIT’s material debt load, we assume a fair price-to-FFO ratio of 12.0 for the stock. Therefore, the current FFO multiple is higher than our assumed fair price-to-FFO ratio. If the stock trades at its fair valuation level in five years, it will incur a -2.7% annualized drag in its returns.

Taking into account the 2% annual FFO-per-unit growth, the 7.3% dividend, and a -2.7% annualized contraction of valuation level, SmartCentres REIT could offer a 6.6% average annual total return over the next five years. This is a decent expected return, though we recommend waiting for a better entry point to enhance the margin of safety and the expected return. Moreover, the stock is suitable only for investors who are comfortable with the risk that comes from the high payout ratio and the material debt load of the trust.

Final Thoughts

SmartCentres REIT can generate most of its revenues from companies with rock-solid balance sheets. It thus enjoys much more reliable revenues than most REITs. This is an important competitive advantage, especially during economic downturns.

Despite its high payout ratio, the stock offers an exceptionally high dividend yield of 7.3%, making it an attractive candidate for income-oriented investors’ portfolios.

On the other hand, investors should be aware of the risk that results from the REIT’s somewhat weak balance sheet. If high inflation persists for much longer than currently anticipated, high interest rates will greatly burden the REIT. Therefore, only investors who are confident that inflation will soon revert to normal levels should consider purchasing this stock.

Moreover, SmartCentres REIT is characterized by extremely low trading volume. This means that it is hard to establish or sell a large position in this stock.

Don’t miss the resources below for more monthly dividend stock investing research.

And see the resources below for more compelling investment ideas for dividend growth stocks and/or high-yield investment securities.