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RioCan Real Estate Investment Fund vs. Toronto-Dominion Bank: Which Is More Attractive for Income Investors?

The search for income has investors scouring the market for reliable companies that can deliver consistent payouts.

Let’s take a look at RioCan Real Estate Investment Trust (TSX:REI.UN) and Toronto-Dominion Bank (TSX:TD) (NYSE:TD) to see if one is a better bet today.

RioCan

RioCan operates about 300 shopping malls in Canada.

The company’s properties are located on prime real estate and normally have anchor tenants that are well-established businesses providing recession-resistant products such as pharmaceuticals, groceries, discount goods, and daily household wares.

Demand remains strong for RioCan’s sites. The company’s Q3 2016 occupancy rate was 95.3% — up from 93.2% in Q3 2015. Operating income increased 9.2% and funds from operations rose 16.1% on a continuing operations basis.

So, things are rolling along quite well.

Management has done a decent job of bringing down debt, and RioCan’s 39.6% leverage ratio makes it one of the lowest-levered REITs.

This is important in the event that interest rates start to rise in a meaningful way.

RioCan has a number of development projects on the go that should help drive funds from operations higher in the coming years, and investors could see the distribution increase as a result.

The current monthly payout of 11.75 cents per unit provides a yield of 5.4%.

TD

TD is widely viewed as Canada’s safest bank stock.

The company gets most of its earnings from retail banking operations and relies less on more volatile segments of the market, such as capital markets.

TD also has very low direct exposure to the oil sector, and the mortgage portfolio is more than capable of riding out a pullback in house prices.

Over the past decade, the company has invested heavily in building a strong U.S. business. Today, TD actually has more branches south of the border than it does in the home market.

Recent investments suggest the company is still seeing opportunities in the U.S., and the exposure provides a nice hedge against any weakness in the Canadian economy.

TD has a solid track record of dividend growth. The current quarterly payout of $0.55 per share provides a yield of 3.3%.

Which should you buy?

Both stocks are solid buy-and-hold picks for income investors.

However, TD’s share price has run up significantly in the wake of the Trump election, and it’s starting to look a bit overbought. RioCan has given back some gains over the past six months, and I think the sell-off might be overdone.

As a result, I would probably make RioCan the first pick today for an income investment.

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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