Riocan Real Estate Investment Trust (TSX:REI.UN) is a top-paying dividend stock on the TSX, with a yield of 6.5%. It’s a tremendous payout that, if safe, could be a fantastic option for income investors to consider. But the danger with yields that are this high is that they may not always be all that safe. Oftentimes a yield becomes so high because the stock has been falling, and as a result, the yield has been climbing.
The company recently reported earnings, which gives investors an updated insight into just how strong its financials are, and how safe the payout is. On August 7, Riocan released its second-quarter results, for the period ending June 30. The key metric for dividend investors to focus on is the funds from operations, or FFO. This is used by REITs to measure their level of profitability, rather than net income which can include non-cash items which aren’t relevant, especially when it comes to assessing the health of the dividend.
For Q2, Riocan’s FFO per unit was $0.47, which was higher than the $0.43 it reported in the prior-year period. Riocan makes monthly distributions to investors of $0.0965 per share, which equates to $0.2895 every quarter. With the FFO per unit coming in much higher than that, it suggests that the dividend is indeed safe, and that investors can rely on it.
There is uncertainty in the Canadian economy these days due to tariffs but with strong financials and a good buffer between its FFO and how much it pays in dividends, Riocan looks like it can make for a solid dividend stock to own. Year to date it’s down less than 2% but it still appears to be a resilient investment nonetheless.
