Are you looking to boost your regular income with monthly dividend income? Consider investing your idle funds or free cash in RioCan (TSX: REI.UN). One of Canada’s largest and well-established real estate investment trusts (REIT) is TSX’s gem in the real estate sector.
Retail-oriented REITs are only attractive to a few investors, but RioCan has weathered the economic downturn triggered by the global pandemic and rising interest rates today. Management’s business growth strategy and initiatives align with its theme, “real vision, solid ground.”
Growth strategy
RioCan started as a predominantly retail portfolio in high-density areas. The $5.77 billion REIT has developed a solid retail core anchored by resilient, necessity-based tenants. Today, the portfolio in Canada’s six major markets is more diversified. It consists of retail, residential and mixed-use properties, not to mention a 44 million square feet development pipeline.
The REIT’s numerous urban mixed-use development projects combine residential and commercial properties, including office spaces. However, around 89% are residential properties (rental and condo or townhouse), and 68% are on transit lines. On the retail front, anchor tenants include Canadian Tire, Loblaw, and Metro.
Solid property fundamentals
RioCan would only report growing net income and high retail occupancy this year if property fundamentals are strong. In the second quarter (Q2) of 2023, committed retail occupancy climbed to 98% from 97.6% a year ago, while the new leasing spread jumped from 6.3% to 11.3%. Notably, net income increased 42.7% year over year to $111.9 million.
Its president and chief executive officer (CEO), Jonathan Gitlin, said, “Our quality portfolio maintained high occupancy and drove strong leasing spreads while our development completions continued to deliver new and diversified income. The consistent strength of our operating results is evidence that our business is set up to succeed in any environment.”
Gitlin added, “The RioCan team remains focused on delivering growing and sustainable value for the long-term while we proactively manage risk and improve our balance sheet.”
Advanced development pipeline
Regarding the necessity-based portfolio, same property net operating income (NOI) grew by 5.2% to $157.21 million versus Q2 2022. About 86% of the total units in RioCan’s six active condominium construction projects have been pre-sold. Also, management expects residential inventory gains in the second half of the year.
As of June 30, 2023, 2,575 condominium and townhouse units are under construction. RioCan said once complete, these projects will generate combined sales revenue of over $860.0 million between 2023 and 2026. The REIT can redeploy the funds for other projects to enhance the development pipeline.
Gutlin reiterated, “Our advanced development pipeline is a key differentiator and competitive advantage. Our pipeline provides a regular cadence of development deliveries that bolsters RioCan’s growth by generating new income.”
He further said the projects are modular, which enables the REIT to select, time and stagger construction commencement of the various phases at different sites for the most favourable economics.
Monthly dividends
RioCan has been paying dividends since 2014. If you invest today, the real estate stock trades at $19.23 per share and pays an attractive 5.56% dividend. You can purchase 1,123 shares ($21,595.29 investment) to produce $100.06 monthly dividend income. The REIT has been paying dividends since 2014.
