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Opinions Paul Taylor
Smart REITSRU.UN.TODON'T BUYJun 23, 2015
Paul TaylorStock price when the opinion was issued
As of Jun 12, 2026. Market Open.
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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.
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
Stockchase Insights
Robert LauzonWalmart is their anchor tenant, so Smart is rock-solid stable. They collected a high percentage of rents during the pandemic. But prospects are limited. SRU may see only 1-2% rent growth when new space comes to market, far below to peers of 5-10% like Riocan. He prefers grocery-anchored shopping centres, like First Capital REIT.
He feels interest sensitives are not where you want to be. These are the ultimate interest sensitive vehicles. Unless you want to hold it for a very long time, don’t go into it.