Retirees: Should You Buy RioCan Real Estate Investment Trust or BCE Inc. Today?

RioCan Real Estate Investment Trust (TSX:REI.UN) and BCE Inc. (TSX:BCE)(NYSE:BCE) are two of Canada’s top income picks. Is one more attractive today?

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Retirees used to rely on GICs and savings accounts to provide the yield they needed to supplement their pension payments.

Today, the returns from those vehicles don’t even cover inflation in most cases, so income investors are turning to stocks to get better yield.

Let’s take a look at RioCan Real Estate Investment Trust (TSX:REI.UN) and BCE Inc. (TSX:BCE) (NYSE:BCE) to see if one is a better income pick.


RioCan owns more than 300 shopping malls in Canada. The company used to have properties in the U.S., but recently sold the 49 sites.

The disposition of the American assets provided about $1.2 billion in net proceeds, which management is using to pay down debt and invest in new projects.

As a result, RioCan’s leverage is at the lowest point in its history, and investors are looking at some interesting growth opportunities.

One development is a plan to build up to 10,000 residential units at a selection of the company’s top urban locations. The project is still in its early days, and investors should expect to see modifications as things move along, but there is an opportunity for RioCan to boost cash flow significantly if the concept takes off.

RioCan continues to see strong demand for its retail properties. The company easily replaced the space vacated by Target Canada and has 15 new sites under development that will generate revenue from an additional 5.9 million square feet of space.

With new revenue streams on the horizon and lower debt payments, RioCan could be in a position to raise its payout in 2017.

The current monthly distribution of 11.75 cents per unit provides a yield of 5.26%. The 12-month running payout ratio has come down from 94.5% on June 30 last year to 90% at the end of June 2016, so things are moving in the right direction.


BCE is a long-standing favourite among retirees for its reliable dividend growth and stable stock price.

The company has extended its reach along the value chain in recent years with acquisitions ranging from sports teams and television channels to retail outlets and radio stations.

When the media assets are combined with the state-of-the-art wireline and wireless networks, you get a business that interacts with most Canadians on a weekly, if not daily, basis.

In fact, every time a Canadian sends a text, listens to the news, watches the weather report, downloads a movie, checks email, or catches up on the sports scores, the odds are pretty good that BCE is involved somewhere along the line.

That’s a powerful business.

BCE is buying Manitoba Telecom Services for $3.9 billion. Assuming the deal goes through, BCE will have a solid base to push further west into markets currently dominated by Telus and Shaw.

BCE has a strong history of dividend growth supported by rising free cash flow. The current quarterly payout of $0.6825 per share yields 4.5%.

Is one a better bet?

Both companies offer above-average yields that should be sustainable for the long term.

Earlier in the year I would have picked RioCan, but the REIT has rallied significantly in recent months, and that has likely wiped out the advantage.

BCE offers a slightly lower yield, but it’s probably the safer bet in the current environment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker has no position in any stocks mentioned.

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