One of the best parts about investing in monthly dividend stocks is seeing that payment arrive each month. Owning a dividend stock that pays you monthly makes budgeting easier and can align payments with monthly obligations.
That’s especially true when compared with the more common quarterly distribution schedule that most dividend-paying stocks follow.
What dividend stock that pays you monthly should you consider for your portfolio?
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Meet RioCan Real Estate: The dividend stock that pays you monthly
RioCan Real Estate Investment Trust (TSX: REI.UN) is one of Canada’s larger REITs. The company owns and operates a portfolio of mainly retail properties located across major Canadian markets.
Many of those retail properties are anchored by necessity-based retailers. That includes grocery stores and other businesses that continue to attract foot traffic regardless of how the economy is doing.
This gives RioCan a defensive source of recurring rental income that eventually makes its way back to unitholders in the form of RioCan’s monthly distribution.
But that’s not the only reason to consider this dividend stock that pays you monthly.
In recent years, RioCan has broadened its portfolio to include an increasing number of mixed-use residential properties. These properties comprise residential towers that sit atop several floors of retail. The properties are also located in major metro markets along transit corridors where there is strong demand.
This is a key development for two reasons.
First, demand for retail still exists, but some commercial retail sites have seen reduced traffic for years as consumers shop with their devices rather than their feet. RioCan’s mixed-use focus provides a boost to that retail traffic from its on-site residential portfolio.
Second, while demand for some forms of retail has dipped, the demand for housing, particularly in major metro markets, has soared. This provides RioCan with an additional, recurring, and diversified source of rental income.
RioCan’s properties are performing well
RioCan’s most recent quarterly results provided several reasons for investors to like what they see.
Retail committed occupancy reached a record 98.8% during the second quarter. In other words, nearly all of RioCan’s available space is already occupied or committed to incoming tenants.
Demand is also allowing RioCan to charge more for that space. The REIT reported blended leasing spreads of 23.1% during the quarter. That highlights the gap between expiring rents and what tenants are willing to pay today.
That strength is feeding directly into the business. Commercial same-property net operating income increased 4.3% year over year during the quarter.
Core funds from operations (FFO), one of the most useful measures for evaluating a REIT’s operating performance, came in at $0.40 per unit. That represented a 5.3% increase from the same period last year.
RioCan’s core FFO payout ratio stood at 73.8% in the most recent quarter. This gives RioCan a cushion between its cash flow and that monthly distribution.
As of the time of writing, that monthly distribution carries a yield of 5.39%. That works out to a monthly $0.0965 per unit. For an investor with $7,500 to invest in RioCan, that works out to just over $400 in annual distributions.
You can’t retire off that, but it will generate over a dozen new units each year from reinvestments. Over a longer period, that can help build a larger income portfolio.
Is this dividend stock that pays you monthly a good investment?
There’s a lot to like about RioCan right now.
Investors get a 5.39% yield paid every month that’s backed by record retail occupancy, strong leasing spreads, and growing core FFO.
While no stock is without risk, RioCan offers a diversified portfolio, recurring monthly income, and defensive appeal.
In my opinion, investors looking for a dividend stock that pays you monthly should consider RioCan as part of a larger, well-diversified portfolio.
