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Topic: Dividend Stocks

RIOCAN REAL ESTATE INVESTMENT TRUST $27.37

RIOCAN REAL ESTATE INVESTMENT TRUST $27.37 (Toronto symbol REI.UN; Units outstanding: 323.7 million; Market cap: $8.9 billion; TSINetwork Rating: Average; Dividend yield: 5.2%; www.riocan.com) is Canada’s largest real estate investment trust.

In the three months ended March 31, 2016, RioCan’s cash flow rose 7.0%, to $147.8 million from $138.0 million a year earlier. Per-unit cash flow gained 4.5%, to $0.46 from $0.44, on more units outstanding.

The trust has now completed the sale of its 49 U.S. malls for $1.9 billion U.S. The value of the properties had risen with the U.S. dollar and the country’s recovering economy.

RioCan will use $510 million of the proceeds toward acquiring 100% ownership of 22 Canadian malls. Currently, it owns 50% of those properties. Its joint-venture partner, U.S.-based Kimco Realty (New York symbol KIM), holds the remaining share. It has agreed to sell its interest for $715 million. The partners have 13 other properties across six provinces. They will together sell ten of those malls. They haven’t yet decided what to do with the remaining three—vacated by Target in 2015.

The 22 properties RioCan will hold onto allow it to increase its exposure to Canada’s six largest markets: Toronto, Montreal, Ottawa, Calgary, Edmonton and Vancouver. These markets now account for 75.0% of its rental revenue.

RioCan trades at 18.1 times its forecast 2016 cash flow of $1.51 a unit. That’s reasonable in light of the REIT’s highly profitable properties and its 94.8% occupancy rate. The units yield 5.2%.

RioCan is a buy.

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