With a 6.3% Dividend Yield, Is it Time to Buy RioCan Stock?

The real estate investment trust (REIT) sector has been suffering lately — but not in terms of dividend yields. Those have remained fairly high across the board. But it’s come literally at a cost. That cost is the share price.

Shares have fallen further and further with the rise of interest rates and inflation cutting into these companies. Yet there is some hope on the horizon — across the market and with some REITs themselves.

One such stock is RioCan REIT (TSX:REI.UN), which saw some positive movement after strong earnings. So, let’s see whether its 6.3% dividend yield and earnings are enough for investors to consider the stock.

Heading into earnings

During its most recent earnings report this month, RioCan stock reported record retail occupancy at 98.3%. This was a huge win, given the current market conditions have seen inflation go up and spending go down. Now, these new leasing spreads of 21% and same-property net operating income (NOI) are in excess of the company’s target range.

Same-property NOI grew by 3.7% year over year, while higher interest expenses decreased in funds from operations (FFO) by $0.02 per unit.

The reduction in FFO per unit from properties sold was helped along by prior buybacks. Meanwhile, net loss for the quarter grew to $73.5 million, down from $3.2 million in net income the year before. This came from fair-value losses in investment properties that came with increasing capitalization rates from current market conditions. That being said, it seems as interest rates come down, this should improve.

For 2023, the company expects FFO per unit will be between $1.77 and $1.80. And that will certainly be helped by the 97.5% occupancy expected through the rest of the year.

Grab it before it’s gone

The thing here is that so much of this is short term. RioCan stock is still one of the largest REITs in the country, providing investors with a diversified range of assets, from living spaces to commercial and retail spaces as well.

Further, that diversification spans the country. You can find their locations pretty much anywhere, which allows for a quicker recovery when the country sees real estate recover as well. So, putting that into perspective, patient investors can certainly get a great deal.

Shares of RioCan stock currently offers a $1.08 dividend, coming out at a 6.26% dividend yield as of writing. Shares are still down by 18% in the last year alone, and yet financially, it’s doing pretty well. It would take just 90% of its equity to cover all its debts. So, even if things go south, it’s not about to go bankrupt.

How much you could earn

Let’s say we see RioCan stock surge back to 52-week highs in the next year or so. That’s certainly doable, as it’s done it before. That would mean you see your shares climb and still collect a massive amount of passive income in dividends as well.

But don’t forget about returns. Returns are passive income as well, so make sure to take that into consideration when choosing your stocks. After all, dividends aren’t great if your shares are doing poorly.

So, here is what a $5,000 investment in RioCan stock could turn into in the next year.

Now, you have $317.52 in dividend income and $2,056 in returns. That’s a total of $2,373.52 in passive income! So, get started today.