Passive Income: How to Get a 6.6% Yield by Piggybacking Off Wal-Mart

It’s been a nasty bear market that has given so many dip buyers and rally chasers false hope. In fact, the sudden gains just don’t come in. If anything, big up moves have proven opportunities to brighten your portfolio. In any case, long-term investors need not fear the bear market or worry too much about the worrying CPI reports or the Fed’s hawkish comments.

At the end of the day, the next 10-20 years count. The next 12-18 months could see more of that. Extreme turbulence and frustration among investors. In any case, staying the course is the best way forward, as unprofitable growth companies continue to implode like a paper bag. Many of these companies called up in 2021 should never have traded at insane 20x to 40x price-to-sales (P/S) multiples.

Bear markets are a great time to make money

Now that the tide has turned, investors should rather bet on the markets than lose interest! Yes, the market has been a bloodbath for nine months. With a looming recession and persistent inflation plaguing our wallets, it seems wise to simply dump your extra tax-free savings account into a guaranteed investment certificate with an interest rate of 4-5%.

Now, fixed income securities have become attractive to passive earners in recent months. With stock valuations at such reasonable multiples, I’d argue that stocks are also the best they’ve seen since the depths of the 2020 stock market crash.

In fact, many investors are now turning their backs on the markets. It was a money-losing game and could continue into the end of the year. Regardless, income investors should find solace in the increased yields of some of the well-run real estate investment trusts (REITs).

When stock prices fall, yields rise. Assuming there’s no payout or dividend cut, you could walk away with a heck of a lot more income per dollar by operating in this bear market than waiting for the dust to settle.

As a wise man once put it, most money is made in bear markets. You won’t realize it at this point. But looking back, you’ll recognize that and thank yourself for buying this REIT with a yield that’s 2-3% higher than usual.

SmartCentres: A smart way to capitalize on Walmart’s recession resilience

In the REIT space, I’m a big fan of SmartCenters REIT (TSX:SRU.UN).

SmartCentres REIT is a retail REIT that I’ve hailed as collateral in previous articles to help you minimize the impact of 7-8% inflation. After falling 16% from its 52-week highs, SmartCentres’ stock is trading at 4.4 times trailing price-to-earnings (P/E) multiples with a whopping (and safe) 6.6% dividend yield.

Smart may be a retail REIT, but it’s proven its resilience through the pandemic. With Walmart I think Smart will also impress everyone with its performance in a recession year as it anchors most of its malls.

Wal-Mart is an incredibly well-run retailer that will draw huge crowds trying to stretch their dollar once a recession hits. In fact, SmartCentres is banking on the resilience of its top tenant. While other renters might feel a small pinch, most will benefit from Wal-Mart shoppers looking to save money at other retailers.

Wal-Mart is a great recession-proof company. And SmartCentres is a stealthy, cheap, and more generous way to play the retail giant.