The market pullback is giving income investors an opportunity to pick up some top quality names with solid payouts at very reasonable prices.
Here are the reasons why I think RioCan Real Estate Investment Trust (TSX:REI.UN), Potash Corp./Saskatchewan Inc. (TSX:POT)(NYSE:POT) deserve to be on your dividend radar.
RioCan
RioCan owns and manages 293 retail properties across Canada and another 47 south of the border. The shopping centres are home to some of the retail industry’s top brands, and most of those companies are doing quite well.
A lot of ink gets spilled over the eventual demise of the mall concept, but people still like the hands-on shopping experience, and that isn’t likely to change anytime soon.
RioCan’s shares have been under pressure this year. The exit of Target from Canada scared some investors away, and the market is also front-running the economic slowdown and an eventual increase in interest rates.
At this point, the sell-off looks overdone.
RioCan reported solid Q2 2015 results with funds from operations coming in at $136 million, up 7% from the same time last year. The company’s tenants don’t seem to be overly concerned about the economic outlook because they re-signed for 1.1 million square feet of space in Q2 at an average rent increase of 9.8%.
RioCan is considering the sale of its U.S.-based assets. Investors should see this as a sign that management is diligently watching the market for opportunities to lock in gains and deploy capital to more advantageous projects.
One development to watch is the company’s move to build condos at the retail locations. The experiment is still in the early stages, but the projects could unlock another source of cash flow that would go straight into the pockets of unit holders.
RioCan pays a distribution of $1.41 per share that yields 5.9%.
Potash Corp.
Potash Corp. has been beaten up this year as a result of a tax change in Saskatchewan and cyclical weakness in the crop nutrients markets.
Investors should look beyond the short-term speed bumps to see that this company is well positioned for growth in the long term.
Last year global potash shipments hit a record 61 million tonnes and the 2015 number is expected to be in line with that number. The market is oversupplied at the moment, but prices are slowly improving, and Potash Corp. is in a great position to benefit from demand growth.
The company is in the final stages of a multi-year expansion program at a number of its sites. This is important for dividend investors because free cash flow should increase as the projects switch from development to production.
Management is currently bidding for control of German producer K+S AG. If the US$8.6 billion deal is successful, it will give Potash Corp. a broader global reach while removing one competitor from the sector.
Potash Corp. pays a quarterly dividend of U.S. $0.38 per share that yields about 6%.
