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Is RioCan (TSX:REI.UN) Stock the Top REIT on the TSX Index?

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Today, I’m going to pick apart the data for RioCan REIT (TSX:REI:UN) and see whether it’s a good buy at the moment. With pot stocks looking decidedly dicey, and the early confidence of the “new NAFTA” deal having faded quite quickly, commentators are fixating on defensive positions. So, how good is today’s choice, and how does it compare with a few other REITs?

A big, bold REIT for the risk averse

With a market cap of $8 billion, RioCan REIT is a good choice for anyone who suffers from the jitters or just likes their dividend stocks to be nice and stable. While a one-year past earnings growth of -14.1% doesn’t hold up well versus the REIT average for the same period of 37.9%, or indeed, its own five-year average past earnings growth of -1.2%, what this stock does have going for it is its sheer size.

At $24.68 a share, it’s overvalued by a couple of dollars next to its future cash flow value, so no great difference there; however, further value indicators can be found in a P/E of 12.5 times earnings (just a hair over the REIT average), and it’s also trading at its book value. In other words, you’re not paying too much over the odds.

A 7.7% expected annual growth in earnings over the next couple of years should see RioCan REIT recoup some of that lost ground I mentioned earlier. There has also been more inside buying than selling in the last 12 months, signaling that confidence is positive on all sides.

A return on equity of 8% last year is passable and looks quite good next to that chunky dividend yield of 5.84%, and a low (for an REIT, at any rate) debt level of 77.1% of net worth makes it stand out from the crowd.

The best of the rest

If you want to go for a competitor instead or pick a selection of complementary Canadian REITs to build a real estate investment trust portfolio, there are a few to select from. Artis Real Estate Investment Trust (TSX:AX.UN) is your choice for office, retail, and industrial real estate is undervalued at the moment, with a P/B of 0.7 times book.

An 8.4% expected annual growth in earnings over the next couple of years, while a dividend yield of 9.36% makes for a very compelling stock; watch that high debt level of 95.7% of net worth, though.

Morguard Real Estate Investment Trust (TSX:MRT.UN) is another retail, office, and industrial pick, offering similar diversification. A P/B ratio of 0.5 times book is appetizing, while an 18.9% expected annual growth in earnings over the next couple years makes it the growth investor’s choice. A dividend yield of 8.07% looks very tasty indeed and almost makes a debt level of 82.2% of net worth feel acceptable.

The bottom line

Any of the above REITs will slip quite nicely into a portfolio for anyone still bullish on real estate. Try all three for a diversified real estate investment trust portfolio or individually to help get exposure to the industry and some tasty passive income as well.

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 Victoria Hetherington has no position in any of the stocks mentioned.

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