RioCan Real Estate Investment Trust (TSX:REI.UN) is a top real estate investment trust (REIT) in Canada. As interest rates have been coming down in recent months, there’s been a lot more excitement surrounding real estate and the potential for the housing market to pick up steam again. Lower rates can also help bring down costs for many businesses and tenants which RioCan relies on for recurring rent payments. As a result, shares of the REIT have been rallying – they’re up 10% in the past six months. The stock is now within a few dollars of its 52-week high of $20.83.
Undeniably, a big reason to invest in the REIT is for its dividend. RioCan makes monthly dividend payments of $0.0925. Not only does that mean you’re collecting a high yield of around 5.9% but you’re also getting it on a more regular basis than other dividend stocks, which typically pay every quarter. Whether you’re a retiree or just want some consistent income each month, a stock like this can potentially be a good investment to hang on to.
But a big question investors may have is whether the dividend is really safe, given its high yield. A key number for investors to focus on is funds from operations (FFO). This is what REITs use rather than just net income to determine how much they can afford to pay in dividends. Over its most recent three-month period, which ended on Sept. 30, RioCan’s diluted FFO per share totaled $0.46. At the current rate, three months of dividend payments would total $0.28, indicating that the payout is more than safe so long as RioCan is able to maintain its current level of profitability.
For dividend investors, this looks to be a solid stock to buy and hold.