James TelfserSmart REITSRU.UN.TOBUYAug 28, 2019

Defensive, lower growth. About 25% of rents come from WMT. Don't expect much growth. Hiccup last year from tenant bankruptcies. Trades in a range, and it's at the higher end. Stock could consolidate after the run it's had. Yield is very safe.

SRU is very well-run, and Walmart is their anchor tenant, which is attractive. Tenant quality is high. But the problem with REITs is that in rocky economic times, REITs either have to cut their dividend or issue shares. He prefers stocks with low payout ratios. Sienna is not structured like a REIT, but the valuations in retirement home stocks like Sienna are much higher. He prefers Sienna, but owns neither.

Challenging sector due to trade plus interest rates. Relatively, shopping centres are a pretty compelling area in today's market. Very strong assets. Main tenant is WMT. Not worried about dividend. 2026 should start seeing benefit from tailwinds of low interest rates.

His pick in the area is PMZ.UN, but SRU.UN isn't far behind.

The CEO has done a great job. Their IFRS is $35 just on their real estate portfolio. Is now building condos. Pays a good dividend. A great long-term hold. Walmart is their anchor tenant and it's doing very well.

CT hold Canadian Tire, while Smartcentres holds Walmart. Both are very stable and low internal growth rates. The latter pays over a 7% dividend, a little more than CT, but the payout ratio is 100%. Therefore, he prefers CT.

Very defensive, and so distribution is high. Flipside of being defensive and with high occupancy rates is that growth of 1-1.5% is below inflation. Higher leverage means income doesn't translate to earnings potential. Better opportunities, especially in necessity-based retail.

Main tenant is WMT, which is a blessing and a curse. WMT drives a lot of traffic and attracts a lot of tenants, and it has great credit. But WMT has locked in low rents for a long time, though rents can be raised for the other tenants. Not as much growth as some of the other grocery-anchored REITs.

True that main tenant WMT typically doesn't have to pay large annual increases in rent, but it does attract other tenants and that's who pays the rent increases. Entering new leases with WMT as it expands. The very large parking lots can be converted to other uses. Great potential to collect the yield and wait for that potential to be realized.

Very defensive income profile. Main anchor is WMT, and the flipside of that stability means internal rent growth is quite low. Not a lot of earnings growth. Attractive yield in low 7% range, but high payout ratio. Better retail opportunities elsewhere.

Very attractive dividend, especially for large caps. Walmart anchor tenant which is very good for business. Stable business that could only get better. 

Walmart is its major tenant, secure, great cashflow. Investors like the distribution of over mid-7%. Retiring low-cost debt, so earnings will have negative FFO growth. He likes to see a return beyond the yield. See his Top Picks.

With 10-year bond yields popping up, some of the REITs are a bit challenged. This is a Canadian REIT, even though WMT is its anchor tenant. He prefers storage REITs in the US. He worries about the Canadian economy. Yield looks strong at over 7%, seems safe.

He's generally positive on retail across Canada. WMT is its largest tenant, with very good credit; but doesn't pay a lot in terms of "escalators" on rents. Lower growth profile than other opportunities. Last quarter, income growth just 1.3%. Own it for a consistent yield; previously not covered, but now it is. 

REIT space is doing well because of interest rates coming down in Canada. Formula is tried, tested, and true. Good value in the name. Good place to be, as long as you have some diversification. Watch the payout ratio.

Likes real estate in general, sector will benefit from lower interest rates. In particular, likes those that are building their businesses; not the ones that are just collecting rents, paying dividends, and going sideways. A good business run by good people.