RioCan updated September 18, 2017

RioCan is updated and rated Buy at $23.84. The company provides a huge amount of detail on its various properties and growth initiatives. The bottom line however is a 5.9% distribution that seems very unlikely to be curtailed and which will likely increase slowly over the years. In addition the units are available at just a hair under book value. And book value is based on the RioCan’s income properties (shopping centers of various types) marked to the value that they trade at among big institutional buyers. That means we can apparently effectively buy into retail shopping infrastructure on the same terms that pension funds and other institutional buyers would pay. All of this is positive. On the other hand these income properties appear to be relatively low return assets reflecting their low risk. And, book value seems likely to decline (unless offset by growth projects) due to higher interest rates. And, there are worries about the future of bricks and mortar retail. Overall though at the current price RioCan looks to be a reasonable investment for those seeking cash yield in their portfolios. In taxable accounts investors should review the taxation of these units which is relatively complex and changes year to year. I would prefer to hold this investment in a non taxable account.

When I first added RioCan to the site on July 9, 2011 I rated it only a Weak Buy / Hold. In part I was concerned by the price to book ratio which at the time was around 1.5 despite the properties being marked to market. I feel more comfortable buying with the price to book at basically 1.0.

I have no immediate plans to buy most because I don’t  have much cash and since I have never had a preference for cash yield versus capital gains. I have generally always strived to maximise return and been agnostic as to dividends versus capital gains. In large measure this may be due to the fact that most (but not all) of my investments have been in non taxable accounts. In taxable accounts since I have not been withdrawing cash I prefer to buy and hold for capital gains (non-taxable until sold) rather than receive taxable distributions. On the other hand I do like the idea of a relatively reliable 5.9% return (assuming no capital loss) just to add stability to a portfolio.