2 Top Canadian REITs for Building Reliable Income

Given their stable cash flows and healthy growth prospects, these two REITs can deliver reliable passive income for their investors.

| More on:
Key Points
  • SmartCentres REIT offers a 6.92% dividend yield with 98.6% occupancy rates across 197 strategically located properties, serving 90% of Canadians within a 10-km radius. In comparison, RioCan REIT provides a 6.1% yield with strong fundamentals, including 97.5% occupancy and 20.6% leasing spreads.
  • Both REITs present attractive buying opportunities with solid development pipelines - SmartCentres has 58.9 million square feet of approved developments and RioCan has 43.8 million square feet, positioning them well to sustain healthy dividend payments as retail demand grows amid population increases.

REITs (real estate investment trusts) are companies that own and operate income-producing properties. Since they are legally required to distribute at least 90% of their taxable income to shareholders, these companies serve as ideal investments for investors seeking income. Against this backdrop, let’s look at two top Canadian REITs that offer attractive buying opportunities.

some REITs give investors exposure to commercial real estate

Source: Getty Images

SmartCentres Real Estate Investment Trust

SmartCentres Real Estate Investment Trust (TSX: SRU.UN) is a fully integrated REIT that operates 197 properties, with around 90% of Canadians having a SmartCentres shopping centre within 10 kilometres. Furthermore, the company benefits from a strong tenant base, with 95% having regional or national presence and 60% providing essential services. Given its strategically located properties, resilient grocery-anchored shopping centres, and solid tenant base, it enjoys a healthy occupancy rate. In the recently reported second-quarter performance, its occupancy rate stood at 98.6%.

Moreover, the demand for retail spaces has been solid amid population growth and sluggish construction. Meanwhile, SmartCentres has around 58.9 million square feet of developmental approvals, with 0.8 million square feet of properties currently under construction. Along with these expansions, the company’s lease-up and renewal activities could support its financial growth in the coming years. Therefore, I expect SmartCentres to sustain its healthy dividend payouts. At present, it distributes a monthly dividend of $0.1542 per share, representing a forward yield of 6.92%. SmartCentres also trades at a reasonable NTM (next-12-month) price-to-earnings multiple of 18, making it an attractive buy.

RioCan Real Estate Investment Trust

Second on my list is RioCan Real Estate Investment Trust (TSX: REI.UN), which owns and operates 178 properties, with a gross leasable area of 32 million square feet. The company leased 1.3 million square feet of retail space during the second quarter, including 1.2 million square feet of renewals. Amid these leasing activities, the company’s occupancy rate stood at a healthy 97.5%. The company’s same-property net operating income (SPNOI)  increased 2% during the quarter. However, removing the impact of higher legal fees, property tax settlements, and provision reversal in the prior year, the company’s SPNOI increased by 4%.

The company’s blended leasing spread came in at 20.6%, marking the third consecutive quarter of spreads in the high teens or above. Amid these solid operating performances, the company’s funds from operations per unit stood at $0.47, up 9.3% from the previous year’s quarter. Its diluted net income per unit increased by 19.5% to $0.49. Further, the company has strengthened its financial position by disposing of its five RioCan Living assets this year, generating $230.4 million. Further, the company ended the quarter with liquidity of $1.34 billion. At the same time, its adjusted debt-to-adjusted earnings before interest, taxes, depreciation, and amortization ratio improved from 8.98 in the previous year’s quarter to 8.88.

Additionally, RioCan has a solid developmental pipeline of 43.8 million square feet of properties, with 0.7 million square feet of property currently in the construction stage. Considering its healthy occupancy rate and expanding asset base, I believe RioCan is well-positioned to continue paying dividends at a healthier rate in the coming years. Currently, it offers a monthly dividend payout of $0.0965/share, translating into a forward dividend yield of 6.1%.

Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends SmartCentres Real Estate Investment Trust. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Dividend Stocks

The AI Boom Needs Copper, Uranium, and Power: This Canadian Stock Could Benefit

AI may feel digital, but its growth depends on massive real-world builds, and Aecon is positioned to get paid for…

Read more »

Fed Chairman Jerome Powell speaks with U.S. president Donald Trump
Dividend Stocks

How the Fed’s First Rate Hike Since 2023 Shook Up Canadian Markets

While the Fed’s rate hike changes U.S. monetary-policy, it does not mean that the Bank of Canada will follow the…

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

I Plan to Keep These Stocks in My TFSA for at Least 10 Years

These TFSA stocks combine income, stability, and growth, giving me three different reasons to hold them for at least 10…

Read more »

Canadian Red maple leaves seamless wallpaper pattern
Dividend Stocks

Brookfield Just Launched a $50 Billion Canada Fund: Should You Buy BAM Stock?

Brookfield and CPP just unveiled a $50 billion “Maple Fund.” It’s a reminder that Brookfield gets the call when Canada…

Read more »

dreaming of financial success
Dividend Stocks

1 of the Most Reliable Payouts You Can Earn Isn’t From Your Job

You can earn dividend income from ETFs like iShares S&P/TSX Capped Composite Index Fund (TSX:XIC).

Read more »

happy woman throws cash
Dividend Stocks

5 Dividend Stocks I’d Trust to Keep Paying Me No Matter What

The five Canadian stocks have a solid earnings base and are positioned to keep paying their shareholders across all market…

Read more »

Confused person shrugging
Dividend Stocks

Is Telus Still a Buy Right Now? Here’s My Verdict

A brutal dividend cut, a new CEO, and a stock down nearly 50% from its highs: Telus has changed. Here's…

Read more »

A meter measures energy use.
Dividend Stocks

Why Settle for 2% When This Stock Pays Double?

A savings account pays about 2% right now. This Canadian dividend stock pays nearly double, with 17 straight years of…

Read more »