This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

This Super Dividend REIT Can't Be Beat


While most retail REITs typically have an occupancy rate in the low to mid 90% area, RioCan again stands out with its above average occupancy rate as shown below.

Occupancy rates above 95% for the last fifteen years help make RioCan the best in class retail REIT. As a comparison, here are some of their "peers" occupancy rates:

RioCan leads the pack in terms of occupancy. Again, best in class.


RioCan is a conservatively levered company, like most investment grade REITs. Below is a snapshot of their debt to capitalization and corresponding interest coverage. Both of these metrics are strong and well within covenanted limits.

Funds From Operations

Funds from operations has steadily increased (with the exception of 2009 due to lower prices on properties available for sale), growing at a compound annual growth rate of 6.8% over the last ten years.


Since the financial meltdown and their entry into the United States, while funds from operations has increased, the number of units outstanding has increased by 43 million since 2008, leading to flat distributions per unit over the same timeframe.

One factor that must be considered for US residents is that there is a 15% Canadian withholding rate (25% for non-Canadian/non-US residents). As such, the taxable nature of the account must be considered when valuing the distribution. Taxable US accounts can claim a credit for the withholding, whereas tax-advantaged accounts cannot.

IFRS and the Balance Sheet

RioCan reports according to International Financial Reporting Standards (IFRS). One of the biggest differences is that IFRS defines an investment property as a property held to earn rentals or for capital appreciation or both. A key characteristic of an investment property is that it generates cash flows largely independent of the other assets held by an entity. Investment property is initially measured at cost; however, subsequent to initial recognition, IFRS requires that an entity choose either the cost or fair value model to account for its investment property. The fair value model requires an entity to record a gain or loss in net earnings arising from a change in the fair value of investment property in the period of change.

Profile and Peer Comparison

RioCan is cheap to U.S. peers on a price/book basis and an EV/EBITDA basis, has a higher dividend than the group and is larger in terms of assets and market capitalization. In other words, an investor can get a bigger company (with better diversification) cheaper and with a higher yield. One thing to note is the leverage. The company is more highly leveraged than their peer group, which is a concern. This is also a reason they have been utilizing the equity market as it brings leverage down. The company has emphasized the de-levering the company is a priority and they have, thus far, been good to their word.

Bottom Line

RioCan REIT is amongst the best in class across the five driving factors of REIT stability and consistency. Investors who want to invest in one of the best in class retail REITs should look to Canada as part of their universe of opportunities, they will not be disappointed.

Going forward, it is reasonable to expect a continued expansion into the United States, continued outlet expansion in Canada (in their joint venture with Tanger Factory Outlet Centers (SKT - Get Report) and growth from their development pipeline. While this might keep the dividend from experiencing significant growth, there is room for growth and it should be expected (keep in mind that nearly 20% of the dividend is in shares).

Good management, a history as a successful operator, a strengthening balance sheet, relatively cheap valuation and the highest dividend yield in the sector points to opportunity.

Michael M. Terry contributed to this report. Terry is a CFA and founder of Rubicon Associates LLC. He has nearly 20 years of experience in the investment management industry focused on the analysis, investment and management of fixed income and preferred stock portfolios.
3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
SKT $35.56 -0.08%
AAPL $95.18 1.64%
FB $117.43 -0.96%
GOOG $692.36 -0.84%
TSLA $232.32 -3.92%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs