Many investors consider RioCan REIT (TSX:REI.UN) as one of Canada’s top real estate companies. It owns great properties, has a diverse tenant base, and recently sold its U.S. operations at a tidy profit.
The company hasn’t missed a dividend payment since it first became publicly traded more than two decades ago, either. That is some impressive consistency. Shares currently yield 5.5% with a payout ratio just over 80% of funds from operations.
There’s just one problem. Dividend growth has been virtually nonexistent. The last dividend hike came all the way back in 2012 when the company increased the monthly payout to shareholders from 11.5 cents per share to 11.75 cents. That’s not a lot.
2017 may finally be different. It could very well mark a new era of dividend growth for RioCan.
The company has turned its growth plans inwards, so to speak. It plans to redevelop dozens of different properties over the next few years, turning strip malls sitting on valuable land into mixed-use buildings. These buildings would have retail space on the bottom and apartments on top.
The company has a long-term goal of owning some 10,000 apartments, as well as negotiating better rent for revamped space.
Much of the proceeds of RioCan’s U.S. sale went towards strengthening the balance sheet. That puts the company in good position to internally fund its expansion program. That should bode well for the bottom line, and, ultimately, the dividend. And not just for 2017, either.
