RioCan Real Estate Investment (REI.UN.TO)

Chart shows a down channel running from mid-2016. This stock has gone nowhere in 5 years, and is one of the yield stocks. Everybody loves yield. Feels REITs like this are facing a lot of headwinds considering the growth of online shopping and the challenges facing retailers. The Canadian economy only grew 0.2% in the last 4 months. The danger is that the down channel continues and you could be making lower highs and lower lows. If you own, he would advise getting out.

REITs are an interesting option to get income from investments. There is the option for the stock price to increase as well. He has HR.UN-T and SRU.UN-T. He has not done a recent analysis but his two holdings were the two that stood out when he last did. REI.UN-T would also be a good conservative option.

Feels you can’t go wrong with this. It is invested in strip centres, not shopping malls. Typically, anchor tenants are grocery stores, banks, etc. which cater to peoples’ every day needs. It is quite sizable and has a decent balance sheet. The concern with REITs is strictly sentiment, as they are considered interest rate sensitive. With this one, he sees a pretty well capitalized company. They have some debt, but are reinvesting in the business. They are looking at redeploying the capital into some development or intensification project which should ultimately cause the net asset value to increase. Dividend yield of 5.6%.

An all retail REIT. However, they are doing a good job of filling up their Target vacancies, which should give them a bit of tailwind for 2018. Last quarter, their occupancy was trending higher. He models decent growth of around 2.5% compounded annually over the next couple of years. Has a strong balance sheet. Cheaper than its retail peers, and is trading cheaper than its five-year average. This is at a level that is buyable.

He likes this, as it is trading at a discount to replacement costs to net asset value. Given its dominant presence in Canada, located in some of the largest cities with the most established retailers, that are trying to cater to peoples every day needs, making them a little less susceptible to the Amazon affect, which has hurt the malls, more than the strip centres. There is a lot of opportunity for them to redeploy capital to intensify some of their properties.

(Top Pick Nov 1/16, Down 4%) He trimmed it back. He was expecting it to go into the TSX 60. Waste Connections went into the index instead. REI.UN-T still might get a crack at it when POT-T and AGU-T merge and represent only one equity in the index. He owns less than he did, but is sticking with it. The Sears Canada thing was also a negative factor for them.

The largest REIT in Canada. It has declined significantly because of concerns of e-commerce. Fundamentally everything is fine. Management strategy is very sound. They’ve concentrated their real estate portfolio in Canada in the larger cities. These are strip centres, not enclosed malls and are anchored by things such as grocery stores. Temporarily, they are immune from the e-commerce threat, because Amazon (AMZN-Q) is not buying whole foods and opening up 2000 stores in Canada. It is going to be a very gradual rollout. You can bank on very stable occupancy, decent balance sheets.

Everyone is concerned about online and the soft economy. This is a yield proxy. If interest rates start to go up REITs are fully valued here. Really cheap relative to its 5 year. He sees decent growth of around 3.5% over 2017 and 2018. A good yield of around 6% with a 94% payout ratio. They had improving occupancy in Q1. A lot of the Target space which is given them a challenge, is coming online. He sees tailwinds on this. As long as REIT valuations hold up this is a good name.

His concern has been that retailing continues to be a difficult environment. It is a very well run company. The dividend has not increased in quite some time and he does not predict one. 5.9% dividend.

You can’t analyse this the way you used to. Dynamics of the retail industry and commercial space are changing so rapidly, that given the properties this company has, are now subject to changes that are happening within the businesses that it serves. He would not look at this one.

A real estate investment trust, and one of the largest operators and owners of shopping centres. They have a big concentration in Ontario. He wouldn’t be particularly bullish on this. The 6% dividend yield might seem juicy, but it is not out of line with what the security has yielded historically over the last 10 years. This is trading at about 1X BV, but it is exposed to bricks and mortar retail, which is in a state of secular loss of market share. It has strong secular headwinds. This stock is not historically cheap on a yield basis. There are better opportunities elsewhere.

Doesn’t own the large REITs, usually because his clients are over indexed to real estate as it is. He doesn’t want a broad exposure of the Canadian retail marketplace. This is just not a very exciting place to be.

The negative sentiment on retail marketing has dragged down a lot of retail REITs both in Canada and the US. Fundamentals for this company are very good. Their holdings are probably in the best locations. 80% of its properties are in Canada and in the 6 largest cities. A lot of properties are anchored by tenants that cater to peoples every day needs. Those kinds of retailers are somewhat immune from the e-commerce threat.

This is turning the corner. Retail has been a tough place. They’ve had to release a lot of their Target properties and have done a good job there. He is projecting that they do 3% FFO growth from 2016 to 2018. Very good balance sheet. They have a lot of development and intensification projects that they can use to grow. His target price is $28. On bad days when there is a yield scare, you could pick it up at about $25, get paid some premium, and when it gets to $28 sell some Calls.

If you want to be in the sector, use ZRE-T because sometimes a stock underperforms and sometimes it outperforms. Recently the sector has been improving while REI.UN-T has not. REITs are not cheap compared to other places to get a dividend.