A High-Yield Dividend Stock That Is Safe for Long-Term Buyers

RioCan Real Estate Investment Trust’s (TSX:REI.UN) is a dividend stock with an extremely attractive high yield. Find out if it is safe.

| More on:

Buying stocks just because they pay high dividend yields has never been a good idea. I have seen bets on high-yielding stocks going wrong when investors were just getting excited about the company’s potential.

For long-term investors, it’s very important to make the distinction between a safe dividend yield and a risky high yield. History is full of examples of companies that had great track records of paying dividends, but were then forced to cut dividends due to the changing business environment in a bid to preserve cash.

Today, I have chosen a high-yielding dividend stock that doesn’t carry the risks I mentioned earlier. Let’s find out if you should buy this name to earn long-term income.

RioCan

RioCan Real Estate Investment Trust (TSX:REI.UN) is Canada’s largest REIT and is well positioned to maintain its high monthly dividend. With 300 retail properties across Canada, it owns and manages the country’s largest portfolio of shopping centers with top quality tenants.

Being Canada’s largest REIT, RioCan is very sensitive to Bank of Canada’s interest rates moves. When the central bank began hiking interest rates this summer, investors shunned the developer on concerns that higher borrowing cost would diminish its investment appeal.

After the two rate increases since July, the Bank of Canada has signaled its intent to adopt a cautious approach going forward in its most recent announcement.

The second reason to be optimistic about this high yielding dividend stock is that RioCan is in the midst of re-balancing its rental portfolio. The company plans to exit the smaller markets and focus on Canada’s six largest cities. In the process, it plans to sell about $2 billion worth of properties and use half the proceeds to buy back its shares.

Once this process is complete, RioCan will have about 90% of annual rental revenue coming from these six markets, with over 50% from the Greater Toronto Area.

The bottom line

Trading at $25.04 a share at the time of writing, RioCan stock is back on the upward trajectory.  With 22 years of uninterrupted dividends, the company has a solid track record when it comes to paying dividends. During that period, RioCan raised its annual distribution 16 times.

RioCan is a safe bet in the real estate space, as it generates enough rental income to manage its monthly distribution of $0.1175 per unit. At the time of writing, the payout provides an annualized yield of 5.83%.

For long-term dividend investors, this high-yield dividend stock offers a good buying opportunity at a time when its return is almost double the average return offered by the companies listed on the Toronto Stock Exchange.

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 Haris Anwar has no position in any stocks mentioned.

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »