If you’re looking to lock in an attractive yield in today’s market, RioCan Real Estate Investment Trust (TSX:REI.UN) is one name that stands out. It’s one of Canada’s largest REITs, focused on necessity-based retail and mixed-use properties, and right now it offers a forward yield of about 6.5%. That’s well above its five-year average and backed by a portfolio anchored by high-quality tenants in some of the country’s most densely populated areas. The market may have overlooked just how much operational momentum RioCan has built in the past year, which could make this an opportune moment to take a closer look.
Into earnings
The second quarter of 2025 reinforced the story of steady growth. Funds from operations per unit climbed 9.3% year over year to $0.47, helped by robust leasing spreads and disciplined cost control. Net income per unit rose even faster, up 19.5%, driven in part by higher fair value gains on investment properties. Revenue jumped over 23% from a year ago, and occupancy held firm at 97.5%. This showed that RioCan keeps its spaces filled even as it upgrades its tenant base. These results came alongside a reduction in adjusted debt-to-earnings before interest, taxes, depreciation and amortization (EBITDA) to 8.88 times, a step toward its targeted range, while maintaining $1.3 billion in liquidity.
What really stands out is the leasing strength. New leases signed in the quarter came with spreads of 51.5%, meaning RioCan is capturing much higher rents as older leases roll off. Renewal spreads of 17.4% also point to strong demand from existing tenants. This isn’t just about squeezing higher rents, it reflects a shift toward more resilient, essential retailers and better long-term tenancy quality.
More to come
The REIT is also making headway on its capital recycling strategy. So far this year, it closed $230 million in asset sales at cap rates around 4.3%, using the proceeds to pay down debt and buy back units. Management clearly believes its units are undervalued, having repurchased 5.6 million units in the first half of the year at an average of $17.99. On the acquisition side, RioCan expanded its stake in a major Montreal mixed-use development. This could drive further growth in its mixed-use and residential rental income over the long term.
While retail remains the core, RioCan’s residential rental platform is quietly becoming a meaningful contributor. Residential net operating income (NOI) rose 25% year over year in Q2. With 14 buildings in operation and several more in the pipeline, this side of the business could become a stronger growth driver. Residential assets also diversify income streams and make better use of urban land holdings.
Considerations
Of course, there are risks. The payout ratio, at around 60.5% of funds from operations (FFO), is healthy for a REIT. Yet rising interest rates could pressure future borrowing costs despite recent debt management moves. The commercial property market is also sensitive to shifts in consumer spending, and while necessity-based tenants are more resilient, economic slowdowns could still dampen leasing momentum. In addition, recent high-profile vacancies, like those from HBC, mean the dividend stock has to keep delivering on its backfill strategy to maintain occupancy and rent growth.
Despite these factors, the near-term outlook remains positive. Management’s guidance for the year calls for FFO per unit between $1.85 and $1.88, with same-property NOI growth of roughly 3.5%. Given the leasing spreads achieved so far, those targets seem well within reach. Meanwhile, today’s investor could bring in almost $650 annually through dividends, dished out monthly, from a $10,000 investment.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| REI.UN | $17.90 | 558 | $1.16 | $647.28 | Monthly | $9,988.20 |
Bottom line
For income-focused investors, RioCan offers the kind of mix that’s hard to find: a high yield supported by strong fundamentals, proven rent growth, and a clear capital allocation strategy. It’s not a flashy growth stock. Yet for those wanting steady cash flow from a blue-chip Canadian dividend stock, this could be a cornerstone holding for years to come.
