3 Stable Retail REITs for +5% Yields

The doom and gloom of brick-and-mortar retail has moved buyers away from retail REITs, such as RioCan Real Estate Investment Trust (TSX:REI.UN), making them more attractive.

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The doom and gloom of brick-and-mortar retail has caused retail real estate investment trusts (REITs) to dip and underperform recently. Since last summer, shares of RioCan Real Estate Investment Trust (TSX:REI.UN), Smart REIT (TSX:SRU.UN), and Plaza Retail REIT (TSX:PLZ.UN) have declined more than 13%, 15%, and 6%, respectively.

They’re now more attractive for juicy income, as they yield higher than 5% after the pullback. Which should you consider for income and growth?

Here’s an overview of the companies.

RioCan REIT yields 5.5%

RioCan is Canada’s largest REIT with an enterprise value of about $14.6 billion. Its portfolio consists of 300 Canadian retail and mixed-use properties, including 15 that are under development.

RioCan’s portfolio is diversified across more than 6,200 tenants with a focus on Canada’s six biggest markets. Moreover, RioCan has about 86% of its revenue generated from national or anchor tenants.

At a high level, the REIT earns about 65.7% of its annualized rental revenue from Ontario, 14.6% from Alberta, 8.7% from Quebec, and 8.5% from British Columbia. By major markets, it earns about 40.4% of its annualized rental revenue from Toronto, 11.8% from Ottawa, 8.1% from Calgary, 5.3% from Montreal, 5.2% from Vancouver, and 4.7% from Edmonton.

RioCan’s top 10 tenants contribute about 32.8% of its annualized rental revenue with weighted average remaining lease terms of five to 11 years. None contribute more than 5% of its revenue. Its tenants include well-known names such as Loblaw, Canadian Tire, Wal-Mart, Cineplex, Metro, Lowe’s, and Dollarama.

Since 1996, RioCan has maintained a strong occupancy of at least 94%. It also maintains a conservative balance sheet with modest leverage.

Furthermore, the REIT has a number of sites in high-growth markets such as Toronto, Ottawa, and Vancouver, in which it can potentially generate higher yields (on land that it already owns) via residential development near transit lines.

shopping mall, retail

Smart REIT yields 5.2%

Smart REIT has 142 shopping centres, one office property, and one mixed-use property in Canada.

It has 82% of its portfolio (by square feet) in Ontario (84 properties), Quebec (21), and British Columbia (13). Nearly all of its sites have both a food store or pharmacy, either in a Wal-Mart or independently.

Smart REIT’s quality is implied by its ability to maintain an average occupancy of 99% since 2005. Its distribution is supported by stable occupancies. Its average lease term is 6.2 years with lease maturities spread out through 2026. Additionally, the average remaining lease term for Wal-Mart, its largest tenant, is 7.8 years with various renewal options of up to 80 years.

Smart REIT’s top 10 tenants contribute about 49.3% of its gross rental revenues with an average remaining lease term of 6.7 years. Wal-Mart contributes 26.3% of its gross rental revenues with others such as Canadian Tire, Lowe’s, Loblaws, and Dollarama contributing 1.6-4.4% of its gross rental revenues.

Smart REIT has identified more than 30 sites that can potentially expand into seniors’ housing, residential, and self-storage opportunities.

Plaza Retail REIT yields 5.6%

Plaza Retail focuses in Atlantic Canada, Quebec, and Ontario. It has interests in 298 properties and maintains a high committed occupancy of about 96%.

Plaza Retail develops in-house for higher cap rates than if it purchases from third-party developers. It also stands out as a REIT that has increased its distribution every year since 2003. It last hiked its distribution by 3.8% in Q1.

National and regional tenants represent 94.7% of its in-place tenant base.

Plaza Retail’s top 10 tenants contribute about 57.9% of its current monthly base rents in place. Investors should note that its top tenant, Shoppers Drug Mart (which belongs to Loblaw), contributes 25.4%, and KFC franchisees contribute 9%.

Investor takeaway

All three REITs offer sustainable yields north of 5%. RioCan has the biggest scale and is the most diversified with no tenant contributing more than 5% of its rental revenue.

Smart REIT’s largest tenant is Wal-Mart, and Plaza Retail’s largest tenant is Shoppers Drug Mart.

The larger the company, the harder it is to grow. So, investors can expect Plaza Retail to grow at the fastest pace of the three. One analyst believes Plaza Retail can grow its funds from operations per unit by about 7% per year for the next three to five years. Of the three, it is also the best valued (although the other two are within fair-valuation ranges).

Should you invest $1,000 in Ces Energy Solutions right now?

Before you buy stock in Ces Energy Solutions, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Ces Energy Solutions wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares of Lowe's and PLAZA RETAIL REIT. David Gardner owns shares of Lowe's.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Here’s Exactly How a $20,000 TFSA Could Potentially Grow to $200,000

Index funds like the iShares S&P/TSX Capped Composite Index (TSX:XIC) are tax free in a TFSA.

Read more »

Dividend Stocks

How I’d Invest $6,000 in Canadian Real Estate Stocks to Build Lasting Wealth

Canadian REITs on sale! See how grocery-anchored retail properties offering 9% yields could turn $6,000 into lasting wealth despite US…

Read more »

rain rolls off a protective umbrella in a rainstorm
Dividend Stocks

Economic Headwinds: Should You Still Consider Buying the Dip?

A market dip might seem like a bumpy road, but it can be far smoother in the future with the…

Read more »

e-commerce shopping getting a package
Dividend Stocks

Consumer Spending Plays Amidst the Current Market Dip

Consumption may go down in market dips, but certain consumer stocks are certainly better off than others.

Read more »

Asset Management
Dividend Stocks

12% Dividend Yield! I’m Buying This TSX Stock and Holding for Decades

Stocks with high-dividend yields carry risks. But they could be a good long-term investment. Here is a 12% dividend stock…

Read more »

Canadian flag
Dividend Stocks

How I’d Build a Foundation of Canadian Value Stocks in My Investment Strategy

Canadian investors can explore iShares Canadian Value Index ETF for value stock ideas to build a foundation for their diversified…

Read more »

Canadian dollars are printed
Dividend Stocks

How I’d Transform a $30,000 TFSA Into a Cash-Flow Machine

Here's why TFSA investors should consider owning dividend stocks such as Mullen Group in 2025.

Read more »

A woman shops in a grocery store while pushing a stroller with a child
Dividend Stocks

Dip Buyers Could Win Big in Today’s Market Dip

If you want to buy the dip, think long-term. Which is why this TSX stock is a top option.

Read more »