MENU

Don’t Miss Out on This 5.5%-Yielding REIT That Pays Monthly

If you had started buying shares of RioCan Real Estate Investment Trust (TSX:REI.UN) when it bottomed out in September after losing 11% year to date, you’d be up over 8% today. And if you had bought a few weeks later when I next wrote about RioCan, you’d be up another nearly 3.5%.

But the other thing you would have gained, had you been buying or holding shares in either of these periods, was a $0.12 dividend. And every month going forward, you’ll receive that dividend, because unlike many other dividend investments that pay quarterly, RioCan distributes on a monthly basis. I’m a big fan of monthly payments, because they allow you to redeploy your money faster than waiting each quarter — this allows even better compounding.

What has likely surprised some investors is that RioCan is up considering it is the owner and operator of many of the largest malls throughout Canada. The message we often hear from financial pundits is that e-commerce has won the war. And yet RioCan consistently demonstrates that this is simply not the case.

In the beginning of November, RioCan announced its third-quarter results, and they were, as expected, quite strong. Revenue increased to $287 million in Q3 from $282 million in the same period last year. And IFRS operating increased by 4.1% to $186 million from $178 million a year prior.

Why are the numbers up? There are a few reasons. First, same-property net operating income increased by 2.4%, which means that RioCan is generating more income from the same portfolio it had a year ago. Second, its committed occupancy improved by 150 basis points to 96.8% from 95.3%. In-place occupancy is only lagging behind by 80 basis points, so RioCan is in a really great position.

Nevertheless, RioCan isn’t operating blindly and recognizes that only the best retail locations will survive. Fortunately, it has a strategy in place to ensure that the properties it owns are the ones that will win.

In October, RioCan announced that it would be selling 100 of its properties for over $2 billion with the expected net proceeds of approximately $1.5 billion. The argument is simple: it currently generates 75% of its annualized rental revenue from the six major Canadian markets. When it sells these properties in secondary markets, it’ll generate over 90%.

We’re talking about markets like Toronto, which continues to see great growth. With population density, RioCan can ensure that its tenants are seeing increased foot traffic, which ensures that they can not only pay rent, but they can pay higher rents if they renew their leases. The goal is to generate over 50% from the Greater Toronto Area alone, so this move is very important.

RioCan intends to take the net proceeds from the sale and repurchase shares of the company. Although RioCan will be leaner, it’ll be a much more efficient business generating greater per-unit revenue than it does currently — and that’s saying something, considering RioCan is so incredibly efficient.

The financial pundits are right when they say traditional retail is suffering. But that doesn’t mean the crème de la crème can’t survive. And RioCan, compared to all other retail operations, is definitely at the top.

1 Massive Dividend Stock to Buy Today (7.8% Yield!) – The Dividend Giveaway

The Motley Fool Canada’s top dividend expert and lead adviser of Dividend Investor Canada, Bryan White, recently released a premium “buy report” on a dividend giant he thinks everyone should own. Not only that – but he’s created a must-have, exclusive report that outlines all the alarming traits of dividend stocks that are about to blow up – and how you can avoid them.

For this limited time only, we’re not only taking 57% off Dividend Investor Canada, but we’re offering you special access to two brand-new reports, free of charge upon signing up. They will outline everything you need to know so you steer clear of dividend burn-outs AND take advantage of the dividend giants in the Canadian market.

While this offer is still available, you can find out how to get a copy of these brand-new reports by simply clicking here.

Fool writer Jacob Donnelly does not own shares of any company mentioned in this article.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.