Smart REIT (SRU.UN-T)

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. 

Great to have a tenant like WMT, as it makes the cashflow very dependable. Being so defensive means not a lot of internal growth, really lags compared to peers, bottom line cashflow not increasing. Higher leverage than peers. Muted earnings growth. 

Higher distribution yield around 8%. Could own for the yield. Dividend secure. Payout ratio below 100%.

Great job getting into other asset types by going vertically on what they already own. Operating income dictated mainly by WMT, which gives a very defensive profile, so he doesn't really worry. Flipside is very little growth. Tight cashflow coverage. Believes distribution of 8% is safe, even though payout ratio spiked above 100% temporarily. Better earnings growth elsewhere.

Units are quite cheap at 11X cash flow, and generally we like it for income. Very little growth is expected, and of course inflation/rates impact it, and the retail sector is somewhat under siege right now. Payout ratio is high at 93%, but did drop from 96% in the Q1. Cash flow in the quarter improved to 54c from 51c. Decent for income but we would not expect much excitement here. 
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Yield of 7% is extremely attractive. Nothing wrong with it, stable. Trades at a discount. Well positioned to weather a challenging economic environment with WMT, but a lower growth profile. Hold, and collect the distribution. Other opportunities in the space, such as FCR.UN.

It operates across Canada with its principle tenant being Walmart. Has stable cash flow with little growth although it is increasing density in existing space. He feels there are other places to be in real estate.

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Diversification effort makes sense. Management is solid and the CEO has significant stakes in the REIT. Revenu was inline with estimates. Per-unit cash flow was 5% better, rising 12%. Occupancy was 97.4%. Debt ratio is good at 42.9% and payout ratio is ok with 85.8%. Fine for income. Unlock Premium - Try 5i Free