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  5. SGR.UN: Can you provide an analysis of this REIT? [Slate Grocery REIT]
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Q: Can you provide an analysis of this REIT? What are the principal risks associated and is the dividend stable? Would this stock be considered “defensive” in nature? With a 9.7% dividend, is it something an income seeking retiree with a moderate risk tolerance should consider. Are there any less risk alternatives you would suggest?
Asked by Donald on January 17, 2024
5i Research Answer:

There are risks here, but seem priced in, at least. As a grocery-anchored REIT its cash flow and tenants tend to be stable. But it is quite small ($766M market cap) and has debt ($1.1B). Both its debt and its share price are sensitive to interest rate moves. The payout ratio has been rising for several years and is now 87%. There is a small cushion on the distribution but not a big cushion. The distribution has not been increased since 2019 but the company continued to pay right through the Covid pandemic. There is little growth here: cash flow this year will be lower than it was 10 years ago. Overall, we would consider it higher risk, not moderate risk. We would be OK owning it as part of a 'basket' of small cap yield stocks, but less entralled with it on its own. We would look to something like DIR.UN or GRT.UN instead.