If you want a paycheque that lands in your account every month, RioCan Real Estate Investment Trust (TSX:REI.UN) deserves a spot on your watchlist and, I’d argue, a spot in your portfolio as well.
I’ll be blunt. The REIT looks like a buy for income investors. You get a 5.2% yield, paid monthly, from one of Canada’s largest landlords. And the units still trade below what management says the underlying real estate is worth.
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Why a grocery-anchored REIT belongs in your income portfolio
A real estate investment trust, or REIT, lets you own a slice of a large property portfolio without becoming a landlord yourself.
In exchange, REITs distribute most of their rental income to unitholders via dividends, allowing you to create a low-cost passive income stream.
RioCan owns roughly 170 properties, mostly open-air and grocery-anchored shopping centres in Canada’s six biggest markets. Its tenants read like a list of stores you already shop at: Loblaws, Metro, Canadian Tire, Winners, and Dollarama.
RioCan owns and operates a diversified portfolio of grocery-anchored Canadian giants. This allows it to benefit from steady cash flow and earnings across business cycles and pay a monthly dividend.
For Canadians holding these units in a TFSA or RRSP, that monthly distribution can top up your income or quietly compound through a reinvestment plan.
A record quarter for the TSX dividend REIT
RioCan’s first-quarter 2026 results were strong across the board. Its blended leasing spreads touched a record 25.8%, driven by new leasing spreads of 58.5%.
Basically, when old leases expire, RioCan signs new tenants at much higher rents, which should drive future free cash flow growth.
Occupancy stayed near full at 98.6% on committed retail space, and the trust reported a retention ratio of 92.4% in Q1 2026. Commercial same-property net operating income, which is organic growth from properties it already owns, climbed 4.7%.
Management reaffirmed full-year guidance of $1.60 to $1.62 in core funds from operations (FFO) per unit. FFO is the cash flow metric REIT investors track instead of earnings. Against roughly $1.16 in annual distributions, RioCan has a reasonable payout ratio of 72.5%.
Analysts tracking RioCan stock forecast the adjusted FFO per unit to increase to $1.72 in 2028, which should lower the payout ratio by almost 10%.
The bear case for RioCan stock
Like other REITs, RioCan has a debt-heavy balance sheet, making it a high-risk bet if interest rates rise significantly over the next 18 months.
In the last interest-rate-hike cycle, RioCan was forced to cut its annual dividend from $1.44 per share to $0.96 per share.
The REIT ended Q1 with an adjusted debt to EBITDA (earnings before interest, tax, depreciation, and amortization) ratio of 8.9 times, which is elevated. However, management is selling its RioCan Living residential assets to lower debt levels.
The Foolish takeaway
Based on consensus price targets, RioCan stock trades at a 4.2% discount as of June 2026. If we adjust for dividends, cumulative returns could be closer to 9.5% over the next 12 months.
RioCan checks most of the boxes I look for in a monthly income stock. You get a 5.2% yield, record-setting leasing, near-full occupancy, and a unit price below both analyst targets and management’s own fair value.
For an investor who wants dependable cash flow without chasing the latest hot trade, this is one of the more compelling names on the TSX right now.
