Have you considered RioCan Real Estate (TSX: REI.UN) recently? In case you haven’t or aren’t familiar with the stock, there’s a slew of reasons why you should buy RioCan stock like there’s no tomorrow.
The first thing that prospective investors should note is that RioCan is a REIT (Real Estate Investment Trust). REITs are special types of companies that own and manage properties much like a landlord.
And just like a landlord, REITs collect rent on those properties and pass much of that rent onto investors in the form of a distribution.
So then, why should investors buy RioCan stock now? Here are three key reasons.
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1- Owning RioCan is better than carrying a mortgage
When determining whether to invest in a REIT like RioCan, the company is often compared with owning a rental property. Owning a rental property is a well-known method for generating passive income. At least it was.
Unfortunately, skyrocketing home prices and rising interest rates have priced out nearly all would-be landlords from the market. And even if an investor were to come up with the downpayment, finding a tenant while paying both the mortgage and property taxes is still a tall ask.
And that’s exactly where the lower-risk option to buy RioCan stock comes into play.
RioCan is one of the largest REITs in Canada with a portfolio of nearly 190 properties. Those properties are situated across Canada, focused mainly on major metro markets.
RioCan’s boasts an extremely high occupancy rate. Its portfolio comprises mainly commercial retail tenants, most of which are some of the largest names in business and finance.
In other words, RioCan generates a reliable revenue stream backed by a long line of established businesses that aren’t closing anytime soon. That fact makes RioCan a beacon of stability in an otherwise volatile market.
But RioCan is also evolving, and that holds immense potential.
2- RioCan is shifting to where the market is going
In recent years, RioCan has begun to shift the composition of its property portfolio. Specifically, the REIT has added an assortment of mixed-use residential properties into the mix.
These properties, which RioCan calls RioCan Living, comprise residential towers that sit atop several retail floors. The properties are also located in high-traffic transit corridors in major metro markets.
This not only caters to the growing shortage of housing in metro markets but also provides an ample source of foot traffic for retailers.
For investors, another added advantage to buying RioCan stock is the significantly lower risk of owning hundreds of properties compared with a single rental property.
3- RioCan offers an insane distribution
One of the best things about owning a rental property is cashing in the monthly rent. Unfortunately, collecting the rent from tenants and paying the mortgage, taxes, and maintenance on the property aren’t as exciting.
Again, this is where the decision to buy RioCan stock shines. RioCan offers investors a tasty distribution, which currently pays out a handsome yield of 6.5%. As an added incentive, the stock also trades within $1 of its 52-week low, making it a good time to buy at a discount.
And much like a landlord that is collecting rent, that distribution is paid out monthly.
To illustrate the appeal of RioCan, let’s consider a $40,000 investment, which for the sake of comparison, is significantly lower than the typical downpayment now required on a home.
For that initial outlay, investors can expect to earn an income of approximately $220 each month.
Prospective investors should note that income does not come with any mortgage payments, maintenance costs, or property taxes.
Even better, investors who do not need to draw on that income can reinvest it until needed. This allows any eventual income to grow even further.
Buy RioCan stock today, hold it for decades
No stock is without risk, and that includes RioCan. Fortunately, RioCan offers investors a lower-risk, well-diversified option to counter owning a rental property.
In my opinion, a RioCan investment should be a small part of every portfolio.
Buy RioCan stock, hold it, and watch it grow.
