Slate Grocery REIT (SGR.UN) - Solid During Uncertainty
The price of everything has gone up. Despite this, there a certain sectors that can withstand the effects of inflation. The "consumer staples" sector is one of them, with the primary staple being food. Everyone has to eat, and people find ways to do it cheaper, but they still continue to eat.
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Food Is A Necessity
It's no surprise that grocery stores tend to be more resilient in down markets, as people will continue to buy food. They may opt for cheaper brands or smaller quantities, but people are still spending a significant portion of their budget at grocery stores.
A Requirement to Stay in Business
Aside from cash and product, what does a grocery store need in order to operate? A building. Most grocery stores lease their building, especially if they're located in a shopping center. When they're located in a strip mall or shopping center, they're considered an "anchor tenant," which means their presence drives business and foot traffic to that location, which encourages other business to lease adjacent suites.
Resilient Real Estate
Real estate can do well even during economic downturns, recessions, etc. I'm no financial advisor, but my bet is that Slate Grocery REIT is a real estate investment trust that can withstand uncertain times because they primarily lease to grocery stores in strip malls and shopping centers. The foot traffic to the grocery stores also results in foot traffic to adjacent businesses, which ultimately means a number of low-risk investment properties with minimal turnover.
Why Slate Grocery REIT?
I'm looking at SGR.UN because their stock price is slightly undervalued compared to their 52-week high and all-time high. They're currently trading at $15.89/share before market open, which is slightly down from their all-time high of $17.22/share. They also pay a dividend of about 7.4%, which they've slowly increased over the last 12 years, and they've never missed a payment. (Source)
While I don't expect significant share price growth yet, I think they have the ability to weather a continued recession as inflation really hasn't been reduced. Time will tell since I'm no financial expert, but I think they're in a good position to be conservative now, grow slowly, and come out even stronger in time.
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That is interesting and something I have never really thought about. It makes perfet sense though. I will have to look into this more. Thanks for sharing.
You're welcome! Yeah, it took me a bit to come around to it, but it makes sense.
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I'm in a constant state of tweaking my portfolio; Loblaws is the big grocery mega-chain up here, a practical monopoly. You have the right ideal in putting a percentage of capital into safe stable staple businesses as a part of any plan.
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Thanks! Yeah, I make a decent amount of tweaks every so often. I like this particular one because I'm not locked into a specific grocery chain.
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If that's true, food is the priority, and a good place is key. In my country, during the crisis and currently, food is paramount.
Yeah, food is key. You still need to have a good business in there, but it's a lot easier to have steady rental income when the business has steady income.
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Investing in food products is always a good option. And as you say, you always need a good location that brings in foot traffic and new customers. It's good to keep these details in mind for a sound investment
Exactly! You get stability from the grocery stores and opportunity for growth with the nearby businesses that want to be close and get foot traffic.
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Food and location are always good investments. Groceries attract people, and people fill shopping malls. Excellent point, my friend. I learn more every day.
Thanks! It's certainly a less-risky investment compared to some other sectors.
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I love inflation. And if the dollar melts, even better.
Inflation isn't always bad. Sometimes you can make money from it. I won't be looking at stocks for a while.
I'm curious. What are you looking at for investing as an alternative to stocks?
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Bonds that adjust for inflation.