RIOCAN REAL ESTATE INVESTMENT TRUST $24.99 (Toronto symbol REI.UN; Units outstanding: 319.9 million; Market cap: $8.2 billion; TSINetwork Rating: Average; Dividend yield: 5.5%; www.riocan.com) has settled its dispute with U.S.-based department store chain Target (New York symbol TGT).

In April 2015, Target closed all 133 of its Canadian stores, including 26 in RioCan’s malls. So far, the trust has found new tenants for seven of these stores. It will have to remodel the other 19, but it expects to have them rented by the end of 2017.

Target has now paid $132 million in compensation. Of that total, $92 million went to RioCan and $40 million went to its partners in some of these malls.

RioCan is a buy.

The post RioCan settles with Target appeared first on TSI Wealth Network.

RIOCAN REAL ESTATE INVESTMENT TRUST $24 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 320.4 million; Market cap: $7.7 billion; Price-to-sales ratio: 6.1; Dividend yield: 5.9%; TSINetwork Rating: Average; www.riocan.com) owns all or part of 305 shopping centres in Canada, including 16 under development. It also owns 49 malls in the U.S.

RioCan has settled its dispute with U.S.-based retailer Target (New York symbol TGT).

In April 2015, Target closed all 133 of its Canadian stores, including 26 in RioCan’s malls. So far, the trust has found new tenants for seven of these stores. It will have to remodel the other 19, but it expects to have them rented by the end of 2017.

Target paid $132 million in compensation. Of that total, $92 million went to RioCan and $40 million went to the trust’s partners in some of these malls.

Meanwhile, in the three months ended September 30, 2015, RioCan’s cash flow rose 5.0%, to $140.2 million from $133.6 million a year earlier. Per-unit cash flow gained 2.3%, to $0.44 from $0.43, on more units outstanding.

Revenue rose 4.5%, to $320.6 million from $306.9 million. The trust is doing a good job of hanging onto tenants and renewing leases at higher rates: rents on renewals rose 8.6% in Canada and 9.8% in the U.S.

Due to the closure of the Target stores, RioCan ended the quarter with a 94.0% occupancy rate, down from 97.0% a year earlier.

The trust recently agreed to unwind its 50/50 joint venture with U.S.-based Kimco Realty Corp. (New York symbol KIM). Formed in 2000, this business jointly owns and manages 35 malls in six provinces.

Under the deal, RioCan will acquire Kimco’s 50% stake in 22 of these properties for $715 million. The partners plan to sell 10 of the joint venture’s other properties over the next few months. They have not yet made a decision about the remaining three, which consist of stores recently vacated by Target.

The deal should add $45 million to RioCan’s annual operating income.

The units trade at 13.7 times RioCan’s likely 2015 cash flow of $1.75 a unit. The $1.41 distribution yields 5.9%.

RioCan is a buy.

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In addition to Loblaw (see first article), we think these three retail stocks have great long-term prospects.

They all lead their markets and have strong brands and reputations that will help them grow. However, only aggressive investors should consider Metro and RioCan.

CANADIAN TIRE CORP. $122 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 75.0 million; Market cap: $9.2 billion; Price-to-sales ratio: 0.7; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.canadiantire.ca) has 495 Canadian Tire stores, which sell automotive, household and sporting goods. Franchisees run most of these outlets. Other operations include 297 gas stations and 91 PartSource auto parts stores.

Canadian Tire also owns Mark’s, which sells casual and work clothing through 379 stores, and the Forzani Group, which offers sporting goods and athletic clothing at 428 outlets, mainly under the Sport Chek and Sports Experts banners.

In the quarter ended October 3, 2015, Canadian Tire earned $199.7 million, up 15.9% from $172.2 million a year earlier. Earnings per share rose 20.5%, to $2.62 from $2.17, on fewer shares outstanding.

The latest quarter included just 80% of the company’s financial- services division following last year’s sale of 20% to Bank of Nova Scotia (Toronto symbol BNS). The move reduced the latest earnings by $0.18 a share. Canadian Tire also sold some real estate for a $0.33-a-share gain.

Overall sales rose 1.9%, to $3.13 billion from $3.07 billion, as increases at the company’s stores and financialservices division offset lower gasoline revenue.

Same-store sales at the Canadian Tire chain rose 3.4% on stronger demand for kitchenware and summer merchandise, like camping gear.

The sporting-goods stores saw a 7.0% same-store sales rise thanks to higher demand for shoes and clothing. Mark’s reported a 0.2% same-store sales decline, as layoffs at Alberta oil producers hurt sales of work clothes and shoes.

As part of a new growth plan, Canadian Tire is adding and upgrading stores and growing online. It will spend between $600 million and $625 million a year on these initiatives from 2015 to 2017.

The plan aims to raise annual sales by 3% at Canadian Tire locations and 9% at its sportinggoods stores. However, Mark’s may have trouble achieving its goal of increasing annual sales by 5%.

Canadian Tire’s earnings will probably improve from a likely $8.04 a share in 2015 to $8.59 in 2016. The stock trades at 14.2 times the 2016 forecast. It also recently raised its dividend by 9.5%.

The new annual rate of $2.30 yields 1.9%.

Canadian Tire is a buy.

METRO INC. $39 (Toronto symbol MRU; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 241.5 million; Market cap: $9.4 billion; Price-to-sales ratio: 0.8; Dividend yield: 1.2%; TSINetwork Rating: Average; www.metro.ca) operates 600 grocery stores and 250 drugstores in Quebec and Ontario.

In its 2015 fiscal year, which ended September 26, 2015, Metro’s earnings rose 13.6%, to $523.6 million from $460.9 million in 2014. It spent $418.0 million on share buybacks in 2015, which is why earnings per share gained 18.7%, to $2.03 from $1.71.

Overall sales rose 5.5%, to $12.2 billion from $11.6 billion. Same-store sales increased 4.0%. Some of these gains come from Metro’s 75% stake in bakery Première Moisson, which it bought for $101.6 million last year. Première Moisson has 23 stores and three plants in Quebec. Rising food prices are also boosting Metro’s results.

The company has an underappreciated asset in its 5.7% stake in Alimentation Couche-Tard (Toronto symbol ATD.B). (Couche-Tard, which operates convenience stores in North America and Europe, is a recommendation of Stock Pickers Digest, our newsletter for aggressive investing.) In fiscal 2015, Metro’s share of Couche-Tard’s earnings jumped 29.1%, to $64.3 million from $49.8 million in 2014.

The company’s long-term debt of $1.15 billion is a low 12% of its market cap. It also holds cash of $21.5 million.

Metro’s earnings will probably rise to $2.26 a share in 2016, and the stock trades at 17.3 times that estimate. That’s high, but it’s still reasonable in light of the company’s strong growth prospects. The $0.47 dividend yields 1.2%.

Metro is a buy.

RIOCAN REAL ESTATE INVESTMENT TRUST $24 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 320.4 million; Market cap: $7.7 billion; Price-to-sales ratio: 6.1; Dividend yield: 5.9%; TSINetwork Rating: Average; www.riocan.com) owns all or part of 305 shopping centres in Canada, including 16 under development. It also owns 49 malls in the U.S.

RioCan has settled its dispute with U.S.-based retailer Target (New York symbol TGT).

In April 2015, Target closed all 133 of its Canadian stores, including 26 in RioCan’s malls. So far, the trust has found new tenants for seven of these stores. It will have to remodel the other 19, but it expects to have them rented by the end of 2017.

Target paid $132 million in compensation. Of that total, $92 million went to RioCan and $40 million went to the trust’s partners in some of these malls.

Meanwhile, in the three months ended September 30, 2015, RioCan’s cash flow rose 5.0%, to $140.2 million from $133.6 million a year earlier. Per-unit cash flow gained 2.3%, to $0.44 from $0.43, on more units outstanding.

Revenue rose 4.5%, to $320.6 million from $306.9 million. The trust is doing a good job of hanging onto tenants and renewing leases at higher rates: rents on renewals rose 8.6% in Canada and 9.8% in the U.S.

Due to the closure of the Target stores, RioCan ended the quarter with a 94.0% occupancy rate, down from 97.0% a year earlier. The trust recently agreed to unwind its 50/50 joint venture with U.S.-based Kimco Realty Corp. (New York symbol KIM). Formed in 2000, this business jointly owns and manages 35 malls in six provinces.

Under the deal, RioCan will acquire Kimco’s 50% stake in 22 of these properties for $715 million. The partners plan to sell 10 of the joint venture’s other properties over the next few months. They have not yet made a decision about the remaining three, which consist of stores recently vacated by Target.

The deal should add $45 million to RioCan’s annual operating income.

The units trade at 13.7 times RioCan’s likely 2015 cash flow of $1.75 a unit. The $1.41 distribution yields 5.9%.

RioCan is a buy.

The post Three more top-quality retail buys appeared first on TSI Wealth Network.

RIOCAN REAL ESTATE INVESTMENT TRUST $24.99 (Toronto symbol REI.UN; Units outstanding: 319.9 million; Market cap: $8.2 billion; TSINetwork Rating: Average; Dividend yield: 5.5%; www.riocan.com) has settled its dispute with U.S.-based department store chain Target (New York symbol TGT).

In April 2015, Target closed all 133 of its Canadian stores, including 26 in RioCan’s malls. So far, the trust has found new tenants for seven of these stores. It will have to remodel the other 19, but it expects to have them rented by the end of 2017.

Target has now paid $132 million in compensation. Of that total, $92 million went to RioCan and $40 million went to its partners in some of these malls.

RioCan is a buy.

The post RIOCAN REAL ESTATE INVESTMENT TRUST $24.99 – Toronto symbol REI.UN appeared first on TSI Wealth Network.

We recommend that you limit aggressive holdings to 30% of your overall portfolio (10% for more conservative investors). That’s especially true in light of the recent stock market volatility.

We like the long-term outlook for these five aggressive stocks. However, only four are buys right now.

RIOCAN REAL ESTATE INVESTMENT TRUST $23 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 320.4 million; Market cap: $7.4 billion; Price-to-sales ratio: 5.7; Dividend yield: 6.1%; TSINetwork Rating: Average; www.riocan.com) owns all or part of 305 shopping centres in Canada, including 16 under development.

The trust recently agreed to sell its 49 U.S. malls for $1.2 billion (Canadian). It expects to complete the sale in April 2016.

RioCan will put $510 million of the proceeds toward its recent deal to buy out its joint venture with U.S.-based Kimco Realty (New York symbol KIM). Formed in 2000, this business jointly owns and manages 35 malls in six provinces.

In December 2015, RioCan acquired Kimco’s 50% stake in 22 of these properties for $715 million. The partners aim to sell 10 of the joint venture’s other malls over the next few months. They haven’t yet made a decision about the remaining three.

RioCan will use the $725 million remaining from the sale of the 49 U.S. malls to pay down its debt of $6.7 billion, which is a high 91% of its market cap. That should cut its yearly interest costs by $18 million.

These savings will let the trust keep paying monthly distributions of $0.1175 a unit, for a 6.1% annualized yield. RioCan trades at 13.8 times its likely 2016 earnings of $1.67 a unit.

RioCan is a buy.

SNC-LAVALIN GROUP INC. $40 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 149.8 million; Market cap: $6.0 billion; Price-to-sales ratio: 0.6; Dividend yield: 2.5%; TSINetwork Rating: Average; www.snclavalin.com) continues to fight criminal charges that accuse the company of using bribes to win Libyan construction contracts between 2001 and 2011. These are the same allegations that prompted the company to replace senior executives in 2012 and bring in a new program to enforce ethical practices.

If convicted, Ottawa could ban SNC from bidding on government contracts for 10 years. However, the company recently signed an agreement with the government that will let it bid on new contracts and keep working on current projects while it fights the charges.

Meantime, SNC continues to win construction contracts outside of Canada. For example, it has teamed up with a Saudi firm to build a cooling system for the airport in Riyadh. SNC’s share of this deal is $98 million.

The company’s balance sheet is strong: as of September 30, 2015, it held cash and investments of $2.45 billion, and its long-term debt was just $864.7 million, or 14% of its market cap. SNC also plans to sell its 16.77% stake in Ontario’s Highway 407 toll road, which could be worth $3 billion.

The stock trades 20.7 times SNC’s projected 2016 earnings of $1.93 a share. That’s a high multiple for a company that gets 40% of its revenue from the struggling oil and gas industry. The $1.00 dividend yields 2.5%.

SNC-Lavalin is a hold.

LINAMAR CORP. $62 (Toronto symbol LNR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 65.1 million; Market cap: $4.0 billion; Price-to-sales ratio: 0.8; Dividend yield: 0.6%; TSINetwork Rating: Average; www.linamar.com) recently agreed to buy Montupet SA, a French maker of aluminum car parts with plants in Europe, North America and Asia. It will pay $1.16 billion for Montupet’s shares and will assume $97.5 million of its debt.

Linamar will borrow the cash it needs to fund this purchase, which will increase its long-term debt from $541.5 million (as of September 30, 2015) to $1.8 billion. That’s a high, but still manageable, 45% of its market cap.

The deal will let Linamar profit as carmakers use more aluminum to cut weight and boost fuel efficiency. The company expects to complete the purchase in February 2016.

Excluding Montupet, Linamar will probably earn $6.95 a share in 2016, and the stock trades at just 8.9 times that estimate. The $0.40 dividend yields 0.6%.

Linamar is a buy.

HOME CAPITAL GROUP INC. $24 (Toronto symbol HCG; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 70.1 million; Market cap; $1.7 billion; Price-to-sales ratio: 2.8; Dividend yield: 3.7%; TSINetwork Rating: Average; www. homecapital.com) recently completed its $17.8- million purchase of Canadian First Financial (CFF), which offers a variety of services, including deposits, mortgages and wealth management, through 37 branches across the country. Home Capital also injected $35 million of additional capital to help stabilize this business.

The deal gives Home Capital access to more funding for its lending activities. The company also expects significant cost savings from merging its systems with CFF’s branches and computer networks.

Meanwhile, Home Capital continues to review mortgages related to brokers who falsified borrowers’ incomes but not their credit scores and property values. As of September 30, 2015, these loans totalled $1.72 billion, or 9.4% of the company’s loan portfolio.

Home Capital expects to complete the review by the end of 2016. Based on its results so far, it doesn’t expect significant credit losses. It has also tightened its lending requirements.

The company will probably earn $4.13 a share this year, and the stock trades at 5.8 times that forecast. The $0.88 dividend yields 3.7%.

Home Capital Group is a buy.

PRECISION DRILLING CORP. $4.28 (Toronto symbol PD; Aggressive Growth Portfolio, Resource sector; Shares outstanding: 292.9 million; Market cap: $1.3 billion; Price-to-sales ratio: 0.7; Dividend yield: 6.5%; TSINetwork Rating: Extra Risk; www.precisiondrilling.com) provides contract-drilling services to land-based oil and gas producers, mainly in North America. The company operates 330 rigs.

Low oil and natural gas prices have hurt rig demand. As a result, the company will spend just $180 million building new rigs and making other upgrades in 2016, down 66.1% from the $531 million it likely spent in 2015.

Precision is also cutting jobs and other costs. These actions have lowered its annual expenses by $40 million.

Precision’s balance sheet remains sound: as of September 30, 2015, it held cash of $438.9 million, or $1.50 a share. Its long-term debt of $2.1 billion is a high 1.6 times its currently depressed market cap. However, it doesn’t have to start repaying these loans until 2019.

The stock now trades at 3.2 times Precision’s cash flow per share, based on the latest quarter. The company continues to pay quarterly dividends of $0.07 a share, for a 6.5% annualized yield. However, it may have to cut its payout if oil prices remain low in 2016.

Precision Drilling is a buy.

The post Five aggressive picks for the long haul appeared first on TSI Wealth Network.

RioCan REIT is ready for future growth with the upcoming sale of its U.S. malls. The trust will not only pay down debt, but half of the proceeds will go to buy out its joint-venture partner in 35 Canadian malls. The U.S. sales will also protect monthly distributions for investors. RioCan REIT remains a buy.

RIOCAN REAL ESTATE INVESTMENT TRUST (Toronto symbol REI.UN; www.riocan.com) owns all or part of 305 shopping centres in Canada, including 16 under development.

The trust recently agreed to sell its 49 U.S. malls for $1.2 billion (Canadian). It expects to complete the sale in April 2016.

RioCan will put $510 million of the proceeds toward its recent deal to buy out its joint venture with U.S.-based Kimco Realty (New York symbol KIM). Formed in 2000, this business jointly owns and manages 35 malls in six provinces.

Dividend stocks: RioCan REIT using proceeds to buy out joint venture partner

In December 2015, RioCan acquired Kimco’s 50% stake in 22 of these properties for $715 million. The partners aim to sell 10 of the joint venture’s other malls over the next few months. They haven’t yet made a decision about the remaining three.

RioCan will use the $725 million remaining from the sale of the 49 U.S. malls to pay down its debt of $6.7 billion, which is a high 91% of its market cap. That should cut its yearly interest costs by $18 million.

These savings will help protect monthly distributions of $0.1175 a unit, for a 6.1% annualized yield. RioCan trades at 13.8 times its likely 2016 earnings of $1.67 a unit.

RioCan is a buy.

For our advice on finding the right dividend stocks for your portfolio, read How to spot the best Canadian dividend stocks.

For our view on two other leading Canadian REITs, read Canadian REIT and H&R REIT follow different paths to growth and income.

The post Dividend Stock: RioCan REIT protects its high yield with sale of U.S. malls appeared first on TSI Wealth Network.

RIOCAN REAL ESTATE INVESTMENT TRUST $25.02 (Toronto symbol REI.UN; Units outstanding: 320.4 million; Market cap: $7.9 billion; TSINetwork Rating: Average; Dividend yield: 5.6%; www.riocan.com) is Canada’s largest real estate investment trust.

In the three months ended September 30, 2015, RioCan’s cash flow rose 5.0%, to $140.2 million from $133.6 million a year earlier. Per-unit cash flow gained 2.3%, to $0.44 from $0.43, on more units outstanding.

The trust has now agreed to sell its 49 U.S. malls for $1.2 billion (Canadian). It expects to complete the sale in April 2016.

RioCan will put $510 million of the proceeds toward its recent deal to buy out its joint venture with U.S.-based Kimco Realty (New York symbol KIM). Formed in 2000, this business owns and manages 35 malls in six provinces.

Under the deal, RioCan will acquire Kimco’s 50% stake in 22 of these properties for $715 million. The partners then plan to sell 10 other properties. They haven’t yet made a decision about the last three, which consist of stores vacated by Target in 2015.

The 22 properties RioCan will fully own fit well with its plans to increase its exposure to Canada’s six largest markets: Toronto, Montreal, Ottawa, Calgary, Edmonton and Vancouver.

RioCan trades at 14.1 times its forecast 2016 cash flow of $1.78 a unit. That’s reasonable in light of the REIT’s highly profitable properties and its 94.0% occupancy rate. The units yield 5.6%.

RioCan is a buy.

The post Riocan Real Estate Investment Trust $25.02 – Toronto symbol REI.UN appeared first on TSI Wealth Network.

RIOCAN REAL ESTATE INVESTMENT TRUST $25.02 (Toronto symbol REI.UN; Units outstanding: 320.4 million; Market cap: $7.9 billion; TSINetwork Rating: Average; Dividend yield: 5.6%; www.riocan.com) is Canada’s largest real estate investment trust.

In the three months ended September 30, 2015, RioCan’s cash flow rose 5.0%, to $140.2 million from $133.6 million a year earlier. Per-unit cash flow gained 2.3%, to $0.44 from $0.43, on more units outstanding.

The trust has now agreed to sell its 49 U.S. malls for $1.2 billion (Canadian). It expects to complete the sale in April 2016.

RioCan will put $510 million of the proceeds toward its recent deal to buy out its joint venture with U.S.-based Kimco Realty (New York symbol KIM). Formed in 2000, this business owns and manages 35 malls in six provinces.

Under the deal, RioCan will acquire Kimco’s 50% stake in 22 of these properties for $715 million. The partners then plan to sell 10 other properties. They haven’t yet made a decision about the last three, which consist of stores vacated by Target in 2015.

The 22 properties RioCan will fully own fit well with its plans to increase its exposure to Canada’s six largest markets: Toronto, Montreal, Ottawa, Calgary, Edmonton and Vancouver.

RioCan trades at 14.1 times its forecast 2016 cash flow of $1.78 a unit. That’s reasonable in light of the REIT’s highly profitable properties and its 94.0% occupancy rate. The units yield 5.6%.

RioCan is a buy.

ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST $32.83 (Toronto symbol AP.UN; Units outstanding: 78.3 million; Market cap: $2.6 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.6%; www.alliedreit.com) owns 147 office buildings, mostly in major Canadian cities.

These mainly Class I properties contain over 10.5 million square feet of leasable area.

Class I refers to 19th- and early-20th-century industrial buildings that have been converted to retail space. They usually feature exposed beams, interior brick and hardwood floors.

Allied spent $400 million acquiring properties in 2012, $182.4 million in 2013 and $234.9 million in 2014. In the first three quarters of 2015, it added four more for $164.4 million.

The new buildings helped raise the trust’s revenue by 5.6% in the quarter ended September 30, 2015, to $90.7 million from $85.8 million a year earlier. Cash flow rose 12.3%, to $42.9 million from $39.2 million. Cash flow per unit gained 1.9%, to $0.55 from $0.54, on more units outstanding.

The units trade at 12.6 times Allied’s forecast 2016 cash flow of $2.61 a unit. They yield 4.6%.

Allied Properties REIT is a buy.

The post High yields from growing REITs appeared first on TSI Wealth Network.

TRANSCANADA CORP., $49.08, Toronto symbol TRP, has agreed to buy Texas-based Columbia Pipeline Group (New York symbol GPCX) for $13 billion U.S. That figure includes $2.8 billion U.S. of Columbia’s debt.

This is a big purchase for TransCanada, which has a market cap of $35.4 billion (Canadian).

Columbia operates natural gas pipelines in the U.S. Northeast, Midwest, Mid-Atlantic and Gulf Coast regions, as well as underground gas storage terminals. It’s now working on $5.6 billion U.S. worth of new pipelines. Columbia has already secured contracts from gas shippers, which cuts the risk of these projects.

To help pay for this acquisition, TransCanada plans to sell some of its electrical power plants in the U.S. northeast along with its minority stake in a Mexican pipeline. In addition, it will raise $4.4 billion (Canadian) by selling up to 96.6 million new common shares at $45.75 a share. That will increase the total outstanding by roughly 14%.

If Columbia shareholders and regulators approve, TransCanada expects to complete the purchase by the end of 2016.

The new operations should immediately increase TransCanada’s earnings. As well, regulated businesses and long-term contracted assets will account for 92% of the combined firm’s earnings.

Moreover, eliminating overlapping operations should save $250 million U.S. a year. That will help TransCanada meet its goal of raising its dividend rate by 8% to 10% each year through 2020.

OUR RECOMMENDATION: TransCanada is a buy.

TransCanada recent coverage

• April 2016 issue
• Hotline for March 4, 2016

RIOCAN REAL ESTATE INVESTMENT TRUST, $27.14, Toronto symbol REI.UN, owns all or part of 305 shopping centres in Canada, including 16 under development.

The trust pays monthly distributions of $0.1175 a unit, for a 5.2% annual yield. These payouts accounted for 90.4% of RioCan’s cash flow in 2015. However, 31.5% of the trust’s investors take part in its distribution reinvestment plan, so they get units rather than cash. On this basis, RioCan’s cash payouts were a more reasonable 62.0% of its cash flow. (If you opt for units instead of cash, you still have to pay income taxes on your distributions for the year when you receive them.)

This week, RioCan announced that it will eliminate the 3.1% discount it offers to unitholders who reinvest their distributions, beginning with the March 2016 distribution, payable on April 7, 2016.

OUR RECOMMENDATION: RioCan is a buy.

RioCan recent coverage

• February 2016 issue
• January 2016 issue

HOME CAPITAL GROUP INC., $37.15, Toronto symbol HCG, is a mortgage lender that serves borrowers who fail to meet the stricter standards of larger, traditional lenders such as Canada’s big banks.

The company has announced more details of its plan to buy back $150.0 million of its shares, or 6.3% of the total outstanding. It will use a Dutch auction process.

Under this plan, shareholders who want to sell their Home Capital shares must offer them for between $34.00 and $38.00 (in increments of $0.10 a share) by April 15, 2016. The final amount will be the lowest price per share that lets Home Capital buy the biggest number of shares for a total of $150.0 million. The company will then pay that price for all shares tendered at or below it. If you tender at a higher price, Home Capital will return your shares. The transactions are commission free.

If you are thinking about selling, you may wish to tender at the top price of $38.00. You may get to sell some or all of the stock you tender at that price without paying brokerage fees. If you are committed to selling a small lot of Home Capital without paying commissions, then tender at the market price just before the offer closes. That strategy is more likely to ensure your shares are bought by the company.

OUR RECOMMENDATION: Home Capital Group is a buy.

Home Capital Group recent coverage

• April 2016 issue
• Hotline for February 12, 2016

PENGROWTH ENERGY CORP., $1.41, Toronto symbol PGF, is no longer part of the S&P/TSX Composite Index. That could put further pressure on the stock, as institutional investors that mimic this index move to sell their Pengrowth holdings.

In 2015, Pengrowth produced an average of 71,409 barrels (57% oil, 43% natural gas) a day. That’s down 2.6% from 73,288 barrels in 2014. In April 2015, the company started up its Lindbergh oil sands project in Alberta, which is now producing around 16,000 barrels a day. However, the company’s sale of some less-important properties reduced existing production. That offset the gains from Lindbergh.

Due to sharply lower oil and gas prices, Pengrowth’s cash flow in 2015 fell 9.2%, to $459.3 million from $505.7 million. Cash flow per share fell 11.5%, to $0.85 from $0.96, on more shares outstanding,

With the Lindbergh project completed, Pengrowth has dropped its capital spending. It fell 79.7%, to $183.8 million in 2015 from $904.0 million in 2014. The company expects to spend just $60 million to $70 million on capital projects in 2016.

Pengrowth’s proved and probable reserves should last roughly 25 years. Its cost-cutting should help it cope until oil and gas prices recover.

OUR RECOMMENDATION: Pengrowth is still a hold.

Pengrowth recent coverage

• March 2016 issue
• February 2016 issue

PRECISION DRILLING CORP., $5.87, Toronto symbol PD, provides contract-drilling services to onshore oil and gas producers, mainly in North America. The company operates 251 rigs.

Falling oil prices have cut drilling activity in Canada and the U.S. by about 50% in the past year. The decline has hurt Precision’s ability to service its long-term debt of $2.2 billion. It is a high 1.2 times the company’s depressed market cap of $1.8 billion.

As a result, Precision has suspended its quarterly dividend of $0.07 a share. In 2015, dividend payments totaled $82.0 million.

The company’s liquidity is strong: as of December 31, 2015, it held cash $444.8 million, or $1.52 a share; it also has access to $550 million U.S. in unused lines of credit.

Precision rents out its rigs under long-term contracts. That will continue to give it steady cash flows while its waits for drilling activity to improve. Demand for Precision’s Super Triple rigs should remain strong. They help drilling operations reach deeper pockets of oil and natural gas than regular rigs do.

OUR RECOMMENDATION: Precision Drilling is still a buy.

Precision Drilling recent coverage

• February 2016 issue
• Hotline for October 23, 2015

The post The Successful Investor Hotline – Friday, March 18, 2016 appeared first on TSI Wealth Network.

The trust is once again focused on Canada’s largest real estate markets after selling all of its malls in the U.S. The proceeds will bolster cash flow and protect high-yield distributions to unitholders.

RIOCAN REAL ESTATE INVESTMENT TRUST (Toronto symbol REI.UN; www.riocan.com) owns all or part of 303 shopping centres in Canada, including 16 under development.

The trust cuts its risk to online shopping and declining mall traffic in several ways. For example, It focuses on Canada’s six largest cities—Toronto, Montreal, Ottawa, Edmonton, Calgary and Vancouver. They account for 75.0% of its rental revenue.

RioCan also focuses on properties that attract a wide variety of tenants. As of March 31, 2016, its occupancy rate was a high 94.8%. Moreover, well-established national chains such as Wal-Mart, Canadian Tire and Cineplex theatres account for 84.2% of RioCan’s rental revenue. The trust spreads out the terms of its leases so that only a few expire each year.

RioCan took advantage of low interest rates to buy new properties. As a result, revenue rose from $988.0 million in 2011 to $1.2 billion in 2014.

In 2015, the trust agreed to sell its 49 U.S. malls for $1.9 billion U.S. It completed the sale in May 2016. If you exclude its U.S. properties, revenue from ongoing operations rose 6.1% in 2015, to $1.1 billion.

Gains and losses on property sales make the trust’s earnings more erratic than its revenue. Its earnings rose from $3.25 a unit (or a total of $873 million) in 2011 to $4.57 a unit (or $1.3 billion) in 2012. Earnings then declined to $2.29 a unit (or $709.5 million) in 2013, and fell to $0.40 a unit (or $141.7 million) in 2015.

Dividend Stocks: Cash flow supports distribution increases

Most REIT investors focus on cash flow instead of earnings, as this measure disregards non-cash items like depreciation. RioCan’s cash flow per unit rose 21.7%, from $1.29 in 2011 to $1.57 in 2015.

Another part of RioCan’s growth strategy involves expanding in densely populated urban areas. It typically forms joint ventures with other property developers to build mixed-use retail, office and residential buildings. Under these deals, RioCan manages the retail portion of the properties.

The trust is also doing a good job finding new tenants for the 26 stores previously occupied by Target Corp., which closed its Canadian operations in May 2015. If it finalizes all of these leases, the annual rental income of $12.4 million will be 14% more than what it would have gotten from Target.

RioCan continues to pay a monthly distribution of $0.1175 a unit, for a 5.0% annualized yield. In the past 12 months, distributions accounted for 89.2% of its cash flow. The units also trade at a reasonable 18.5 times RioCan’s likely 2016 cash flow of $1.51 a unit.

Recommendation in The Successful Investor: BUY

For our recent report on a Canadian dividend stock that’s made some big changes, read Restructuring pays off for Maple Leaf Foods.

For our view on how to judge leading dividend stocks, read High growth dividend stocks offer investors a unique blend of capital gains and income.

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TRANSCANADA CORP., $55.59, Toronto symbol TRP, announced this week that it will build a new 800-kilometre natural gas pipeline in Mexico.

The project—called Sur de Texas-Tuxpan—will cost $2.1 billion U.S. and is part of a new joint venture agreement with Sempra Energy (New York symbol SRE).

The company will contribute $1.3 billion U.S. for 60% of the operation. It will also operate the pipeline when it starts up in late 2018. Sempra will pay $800 million U.S. for the remaining 40%.

To put this investment in context, TransCanada earned $494 million (Canadian), or $0.70 a share, in the three months ended March 31, 2016.

The joint-venture partners have a 25-year contract to supply gas for Mexico’s state-owned electrical power company. That cuts the risk for this project. TransCanada is also building two other gas pipelines in the area, so it can lower its costs by sharing workers and equipment.

OUR RECOMMENDATION: TransCanada is a buy.

TransCanada recent coverage

• June 2016 issue
• May 2016 issue

CAE INC., $16.15, Toronto symbol CAE, has won a contract to design and build a Naval Training Centre for the United Arab Emirates (UAE) Armed Forces. This facility will focus on preparing sailors to handle combat situations.

In addition, the company will supply the UAE forces with helicopter simulators and related pilot-training devices.

CAE expects to fulfill these contracts sometime between 2017 and 2019.

In all, the deals are worth $145 million. That’s equal to 6% of the company’s annual revenue of $2.5 billion. If this client exercises its options for more equipment, the entire order could be worth $450 million over the next 15 years.

OUR RECOMMENDATION: CAE is our top Conservative buy for 2016.

CAE recent coverage

• July 2016 issue
• Hotline for May 20, 2016

RIOCAN REAL ESTATE INVESTMENT TRUST, $28.19, Toronto symbol REI.UN, owns all or part of 303 shopping centres in Canada, including 16 under development.

This week, the trust formed a new 50/50 joint venture with Plaza Retail REIT (Toronto symbol PLZ.UN). This new business will redevelop three of RioCan’s shopping malls: two in eastern Ontario and one in New Brunswick.

Under the terms of the agreement, RioCan sold 50% of these properties to Plaza for $11.5 million. That’s equal to 11% of its first quarter cash flow of $108.2 million, or $0.31 a unit. Plaza will also assume responsibility for the redevelopment, and manage these malls.

The sale frees up cash that RioCan can direct to more-important projects in Canada’s six largest cities—Toronto, Montreal, Ottawa, Edmonton, Calgary and Vancouver. They account for 75.0% of its rental revenue.

OUR RECOMMENDATION: RioCan is a buy.

RioCan recent coverage

• June 2016 issue
• Hotline for April 15, 2016

PENGROWTH ENERGY CORP., $2.32, Toronto symbol PGF, produces oil and natural gas in Western Canada and off the coast of Nova Scotia.

The stock has rebounded strongly from its low of $0.66 in January 2016. That’s partly because prominent Toronto investor Seymour Schulich continues to buy more shares. He’s now Pengrowth’s largest shareholder with an 18.3% stake. That’s up from 17.4% in May 2016.

Schulich has a long history of investing in small oil and mining firms. These include a 27.6% stake in Birchcliff Resources (Toronto symbol BIR). It develops, produces and explores for oil and gas in Western Canada. Birchcliff is a recommendation of Stock Pickers Digest, our newsletter that focuses on aggressive investments.

Schulich’s involvement is a plus for Pengrowth. But its shares likely need stronger oil prices in order to move higher.

OUR RECOMMENDATION: Pengrowth is still a hold.

Pengrowth recent coverage

• Hotline for June 3, 2016
• June 2016 issue

ENCANA CORP., $10.48, Toronto symbol ECA, remains focused on its four key projects: Montney (B.C.), Duvernay (Alberta) and Eagle Ford and Permian (both in Texas). These fields produce large amounts of oil and natural gas, including liquids such as propane and butane.

Montney is Encana’s most important property. In the first quarter of 2016, it accounted for 54% of the company’s total gas production, and 17% of its liquids output.

The company continues to expand Montney. It expects these investments will more than double the project’s gas production by the end of 2026. Liquids production will also triple.

To handle the higher output, Encana is now building three new gas-processing plants at Montney. These facilities should begin operating in late 2017 and early 2018. In all, they will cost $1.3 billion U.S. To put that in context, the company’s market cap (the value of all outstanding shares) is $8.8 billion (Canadian).

Even at today’s low oil and gas prices, Encana expects Montney will generate positive cash flow thanks to the project’s low operating costs.

OUR RECOMMENDATION: Encana is still a buy.

Encana recent coverage

• June 2016 issue
• Hotline for April 1, 2016

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RIOCAN REAL ESTATE INVESTMENT TRUST $27.20 (Toronto symbol REI.UN; Units outstanding: 317.8 million; Market cap: $8.7 billion; TSINetwork Rating: Average; Dividend yield: 5.2%; www.riocan.com) is Canada’s largest real estate investment trust (REIT), with interests in 338 shopping malls containing over 92 million square feet of leasable area. That total includes 48 U.S. malls with over 13 million square feet.

In the three months ended March 31, 2015, RioCan’s revenue rose 7.7%, to $331.0 million from $307.4 million a year earlier. Cash flow per unit gained 4.8%, to $0.44 from $0.42.

The trust’s latest acquisitions increased its rental space by 1.7%. It’s also doing a good job of renewing current tenants at higher rates: rents on renewals rose 9.8% in Canada and 8.3% in the U.S.

Former tenant Target Canada recently abandoned 26 stores in RioCan’s malls. So far, RioCan has found new tenants for eight of Target’s former stores. It hopes to fill the remaining 18 over the next few months, but it will probably have to remodel them to handle two or more tenants.

The units trade at 16.2 times RioCan’s forecast 2015 cash flow of $1.68 a unit. That’s reasonable in light of the trust’s highly profitable properties and 96.7% occupancy rate. The units yield 5.2%.

RioCan is a buy.

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Investors want to know what we think about real estate investing in Canada—and the answers may surprise you.

We’re constantly asked about real estate investing in Canada and we understand the appeal. Even though today’s house prices are high, mortgage interest costs are near historic lows. And owning your own home has a number of advantages.

For example, owning your house is a great tax shelter. That’s because gains on your principal residence are exempt from capital-gains taxes. Note, though, that this benefit only applies to your principal residence. You must still pay tax on gains on the sale of a recreational property, such as a cottage or a ski chalet. But these properties generally appreciate at a much slower rate than, say, a home in a major urban centre.

Many investors underestimate the risk and cost of owning rental property

Capital-gains taxes are also applicable to gains on homes you buy for investment purposes, such as rental properties. Moreover, this type of real estate investing in Canada involves a number of other commitments that can make it feel more like running a small business than, say, investing in stocks. With stocks, you only have to tell your broker to buy—everything else is done for you.

In contrast, when you own rental property, you have to spend time finding and dealing with tenants, arranging for maintenance, doing the accounting and so on. You can hire others to do these tasks for you, but that can get very expensive.

Moreover, real estate investing in Canada can entail higher levels of risk than stocks. That’s because real estate is less liquid, more expensive to manage and to buy or sell, and highly geographically concentrated. Rising crime, unpleasant neighbours and other changes on the street or in your property’s neighbourhood can make it hard to find tenants or buyers. So can physical problems, like adverse traffic patterns, backed-up sewers and zoning changes that allow undesirable development, or limit what you can do with your property.

Many real estate investing enthusiasts say that if you buy a property with a 20% down payment (which is the Canadian government’s proposed new minimum to qualify for government-backed mortgage insurance on a property that is not your principal residence), then a 20% rise in the property’s value means you have doubled your money.

However, that claim neglects the costs of selling (up to 5% or 6% for real-estate commissions, plus lawyer’s fees and related costs). It also overlooks any negative cash flow you may have experienced while you owned the property, because rents failed to cover expenses.

REITs can kick start your real estate investing in Canada

We continue to believe that ownership of a primary residence is all the real estate exposure most investors need. However, if you want to add to your real estate holdings, one good way to do it is through real estate investment trusts, or REITs.

Real estate investment trusts invest in income-producing real estate, such as office buildings and hotels. That’s a segment of the market that is difficult for most investors to access through direct ownership of property. Moreover, real estate investment trusts save you the cost, work and risk of owning investment property yourself.

If you’re interested in real estate investing in Canada through a REIT, you should look into the RioCan Real Estate Investment Trust (symbol REI.UN on Toronto). RioCan is Canada’s largest real estate investment trust. RioCan owns 287 shopping centres located across Canada. It specializes in big-box outdoor malls (these malls feature large stores that are usually part of a chain). We cover RioCan in our Successful Investor newsletter.

The best real estate investment trusts have good management and balance sheets strong enough to weather an economic downturn. They also have high-quality tenants, and they carefully match their debt obligations with income from their leases. The best ones are still doing well, despite the economic slowdown, and are taking advantage of low interest rates to refinance long-term mortgages.

If you’re investing in real estate primarily for profit, you should look at multiple-unit rental housing or commercial properties, especially those with big parking lots or extra land. Investments like these can give you current income, plus long-term development possibilities. That’s a potent combination for patient investors. And of course, location is the most crucial part when it comes to real estate investing in Canada and in any country.

Have you used real estate investing in Canada as a way to diversify your investments? What types of properties do you own? Has it been profitable for you? Share your experience with us in the comments.  Share your experience with us in the comments.

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RIOCAN REIT $27.17 (Toronto symbol REI.UN; Units outstanding: 322.4 million; Market cap: $8.8 billion; TSINetwork Rating: Average; Dividend yield: 5.2%; www.riocan.com) formed a 50/50 joint venture in July 2012 with ALLIED PROPERTIES REIT $35.35 (Toronto symbol AP.UN; Units outstanding: 78.5 million; Market cap: $2.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.2%; www.alliedreit.com).

Their goal was to purchase buildings in urban areas and “intensify” their revenue and cash flow, mainly by adding tenants. RioCan manages the retail portion of these developments, while Allied handles the office portion.

The partners own the King-Portland Centre in downtown Toronto, among others. They are now building a new office/retail structure on the site. This week, online shopping firm Shopify Inc. agreed to become the anchor tenant for the building. RioCan and Allied expect to complete this project in 2018.

RioCan REIT is a buy. Allied Properties REIT is also a buy.

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RIOCAN REIT $27.17 (Toronto symbol REI.UN; Units outstanding: 322.4 million; Market cap: $8.8 billion; TSINetwork Rating: Average; Dividend yield: 5.2%; www.riocan.com) formed a 50/50 joint venture in July 2012 with ALLIED PROPERTIES REIT $35.35 (Toronto symbol AP.UN; Units outstanding: 78.5 million; Market cap: $2.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.2%; www.alliedreit.com).

Their goal was to purchase buildings in urban areas and “intensify” their revenue and cash flow, mainly by adding tenants. RioCan manages the retail portion of these developments, while Allied handles the office portion.

The partners own the King-Portland Centre in downtown Toronto, among others. They are now building a new office/retail structure on the site. This week, online shopping firm Shopify Inc. agreed to become the anchor tenant for the building. RioCan and Allied expect to complete this project in 2018.

RioCan REIT is a buy. Allied Properties REIT is also a buy.

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CGI GROUP INC., $63.39, Toronto symbol GIB.A, is Canada’s largest provider of computer-outsourcing services. It helps its clients automate routine functions such as accounting and buying supplies. That makes companies more efficient and lets them focus on their main businesses.

In its 2016 third quarter, which ended June 30, 2016, CGI earned $273.8 million. That’s a 6.5% increase from the $257.2 million it earned a year earlier. Per-share profits jumped 11.3%, to $0.89 from $0.80, on fewer shares outstanding. The consensus estimate had been for $0.88.

Revenue improved 4.2%, to $2.67 billion from $2.56 billion. The consensus forecast was for $2.6 billion. The gain is mainly due to the weaker Canadian dollar, which increased the contribution of the company’s overseas sales. If you exclude currency gains, revenue rose 0.6%.

In the latest quarter, higher revenue in France, the U.K. and Asia offset falling contributions from Canada, the U.S., Nordic countries (Norway, Sweden, Finland and Denmark) and other European markets such as Germany and the Netherlands.

The company signed $2.9 billion in contracts during the latest quarter, up 32.0% from $2.2 billion a year earlier. Of that total, 46% came from extensions and renewals while 54% came from new business. CGI ended the quarter with a $20.6 billion backlog, up 4.7% from a year earlier. These contracts are equal to 1.9 times its annual revenue.

OUR RECOMMENDATION: CGI Group is our top Aggressive buy for 2016.

CGI Group recent coverage

• August 2016 issue
• July 2016 issue

CANADIAN NATIONAL RAILWAY CO., $82.77, Toronto symbol CNR, operates Canada’s largest railway. Its 32,200-kilometre network stretches across the country and passes through the U.S. Midwest to the Gulf of Mexico.

Producers of crude oil, coal, iron ore and other commodities are shipping less in response to lower commodity prices.

As a result, CN’s overall volumes fell 11.7% in the three months ended June 30, 2016. Revenue also declined 9.1%, to $2.8 billion from $3.1 billion a year earlier. Even so, that beat the consensus forecast of $2.3 billion.

The company’s earnings in the quarter fell 6.8%, to $865 million from $928 million a year earlier. It spent $533 million on share buybacks during those three months. Due to fewer shares outstanding, earnings per share declined 3.5%, to $1.11 from $1.15. That also beat the consensus estimate of $1.04 a share.

Meantime, CN continues to benefit from lower fuel costs and pension expenses: its operating ratio in the quarter improved to 54.5% from 56.4% a year ago. (Operating ratio is calculated by dividing regular operating costs by revenue. The lower the ratio, the better.)

The company forecasts earnings of $4.44 a share for all of 2016—it expects higher shipments of grain, automotive parts, forestry products and refined fuels to offset lower shipments of crude oil and other commodities. The stock trades at a still reasonable 18.6 times its forecast.

OUR RECOMMENDATION: CN Rail is a buy.

CN Rail recent coverage

• August 2016 issue
• May 2016 issue

RIOCAN REAL ESTATE INVESTMENT TRUST, $28.98, Toronto symbol REI.UN, owns all or part of 302 shopping centres in Canada, including 15 under development.

In 2012, the trust formed a joint venture with Allied Properties REIT (Toronto symbol AP.UN) and Diamond Corp. to re-develop a large block in downtown Toronto. RioCan owns 40% the project, called The Well. It includes retail, office and residential buildings.

This week, the partners agreed to sell most of the residential component of The Well to other developers for $180 million. RioCan’s share of that total is $72 million. To put that in context, its cash flow was $121.9 million, or $0.37 a unit, in the second quarter of 2016.

The partners plan to begin work on the project in early 2017, and finish in 2020. At that time, they will complete the sale of the residential portion. However, RioCan will continue to own 50% of one residential building on the site.

OUR RECOMMENDATION: RioCan is a buy.

RioCan recent coverage

• Hotline for June 17, 2016
• June 2016 issue

LOBLAW COMPANIES LTD., $72.83, Toronto symbol L, currently operates over 1,100 supermarkets across Canada.

In March 2014, the company purchased the Shoppers Drug Mart chain of 1,300 drugstores for $12.3 billion in cash and shares. Eliminating overlapping operations has cut the company’s annual costs by $300 million.

Thanks to the savings, Loblaw’s earnings in the three months ended June 18, 2016, rose 17.7%, to $412 million from $350 million a year earlier. The company spent $132 million on share buybacks during the quarter. As a result, earnings per share gained 20.2%, to $1.01 from $0.84. That beat the consensus estimate of $0.94 a share.

Overall sales rose 1.9%, to $10.73 billion from $10.54 billion. That missed the consensus forecast of $10.75 billion.

Excluding gasoline purchases, same-store sales at Loblaw’s supermarkets rose 0.7%. That offset lower food prices and was mainly due to more customer traffic.

Shoppers’ same-store sales gained 4.0%. That reflects a 3.6% rise in prescription drug sales and a 4.3% increase in the sale of other merchandise.

Loblaw will probably earn $3.86 a share for all of 2016. The stock trades at 18.9 times that forecast. It’s a reasonable p/e in light of the company’s high market share and strong growth prospects. The $1.04 dividend yields 1.4%.

OUR RECOMMENDATION: Loblaw is a buy.

Loblaw recent coverage

• July 2016 issue
• Hotline for April 15, 2016

TECK RESOURCES LTD., $20.81, Toronto symbol TCK.B, is a leading producer of metallurgical coal, a key ingredient in steelmaking. It also produces copper and zinc.

The stock rose 17% this week after the company reported better-than-expected earnings. That’s mainly due to a successful cost-cutting plan, which has helped it cope with weak commodity prices.

In the three months ended June 30, 2016, Teck earned $3 million, or $0.01 a share. That beat the consensus forecast of a $0.01-a-share loss. A year earlier, the company earned $79 million, or $0.14.

Teck’s overall revenue for the quarter dropped 13.0%, to $1.7 billion from $2.0 billion. While prices for steelmaking coal fell 12.6%, sales volumes declined 3.1%, to 6.3 million tonnes from 6.5 million a year earlier. Together, those factors led to an 11.3% drop in revenue from coal (39% of total). Copper sales (30%) also dropped, 26.6%.

On the other hand, zinc sales (31% of revenue) rose 2.6%.

As of July 27, 2016, Teck held cash of $1.4 billion. That’s enough to cover its final contribution—$960 million—to the Fort Hills oil sands project. The operation is now 60% complete, and should start up in late 2017. The company expects to end the year with cash of more than $700 million.

OUR RECOMMENDATION: Teck is still a buy.

Teck recent coverage

• July 2016 issue
• Hotline for May 27, 2016

Our next Hotline will go out on Friday, August 5, 2016.

The post The Successful Investor Hotline – Friday, July 29, 2016 appeared first on TSI Wealth Network.

RIOCAN REAL ESTATE INVESTMENT TRUST $28 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 324.8 million; Market cap: $9.1 billion; Price-to-sales ratio: 8.1; Dividend yield: 5.0%; TSINetwork Rating: Average; www.riocan.com) owns all or part of 303 shopping centres in Canada, including 16 under development.

The trust cuts its risk to online shopping and declining mall traffic in several ways. For example, It focuses on Canada’s six largest cities—Toronto, Montreal, Ottawa, Edmonton, Calgary and Vancouver. They account for 75.0% of its rental revenue.

High-quality tenants draw shoppers

RioCan also focuses on properties that attract a wide variety of tenants. As of March 31, 2016, its occupancy rate was a high 94.8%. Moreover, well-established national chains such as Wal-Mart, Canadian Tire and Cineplex theatres account for 84.2% of RioCan’s rental revenue. The trust spreads out the terms of its leases so that only a few expire each year.

RioCan took advantage of low interest rates to buy new properties. As a result, revenue rose from $988.0 million in 2011 to $1.2 billion in 2014.

In 2015, the trust agreed to sell its 49 U.S. malls for $1.9 billion U.S. It expects to complete these sales in August 2016. If you exclude its U.S. properties, revenue from ongoing operations rose 6.1% in 2015, to $1.1 billion.

Gains and losses on property sales make the trust’s earnings more erratic than its revenue. Its earnings rose from $3.25 a unit (or a total of $873 million) in 2011 to $4.57 a unit (or $1.3 billion) in 2012. Earnings then declined to $2.29 a unit (or $709.5 million) in 2013, and fell to $0.40 a unit (or $141.7 million) in 2015.

Cash flow tells a different story

Most REIT investors focus on cash flow instead of earnings, as this measure disregards non-cash items like depreciation. RioCan’s cash flow per unit rose 21.7%, from $1.29 in 2011 to $1.57 in 2015.

Another part of RioCan’s growth strategy involves expanding in densely populated urban areas. It typically forms joint ventures with other property developers to build mixed-use retail, office and residential buildings. Under these deals, RioCan manages the retail portion of the properties.

Nice recovery following Target’s exit

The trust is also doing a good job finding new tenants for the 26 stores previously occupied by Target Corp., which closed its Canadian operations in May 2015. If it finalizes all of these leases, the annual rental income of $12.4 million will be 14% more than what it would have gotten from Target.

RioCan continues to pay a monthly distribution of $0.1175 a unit, for a 5.0% annualized yield. In the past 12 months, distributions accounted for 89.2% of its cash flow. The units also trade at a reasonable 18.5 times RioCan’s likely 2016 cash flow of $1.51 a unit.

RioCan is a buy.

The post RioCan aims to cut risk, boost cash flow appeared first on TSI Wealth Network.

RIOCAN REAL ESTATE INVESTMENT TRUST $28 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 324.8 million; Market cap: $9.1 billion; Price-to-sales ratio: 8.1; Dividend yield: 5.0%; TSINetwork Rating: Average; www.riocan.com) owns all or part of 303 shopping centres in Canada, including 16 under development.

The trust cuts its risk to online shopping and declining mall traffic in several ways. For example, It focuses on Canada’s six largest cities—Toronto, Montreal, Ottawa, Edmonton, Calgary and Vancouver. They account for 75.0% of its rental revenue.

High-quality tenants draw shoppers

RioCan also focuses on properties that attract a wide variety of tenants. As of March 31, 2016, its occupancy rate was a high 94.8%. Moreover, well-established national chains such as Wal-Mart, Canadian Tire and Cineplex theatres account for 84.2% of RioCan’s rental revenue. The trust spreads out the terms of its leases so that only a few expire each year.

RioCan took advantage of low interest rates to buy new properties. As a result, revenue rose from $988.0 million in 2011 to $1.2 billion in 2014.

In 2015, the trust agreed to sell its 49 U.S. malls for $1.9 billion U.S. It expects to complete these sales in August 2016. If you exclude its U.S. properties, revenue from ongoing operations rose 6.1% in 2015, to $1.1 billion.

Gains and losses on property sales make the trust’s earnings more erratic than its revenue. Its earnings rose from $3.25 a unit (or a total of $873 million) in 2011 to $4.57 a unit (or $1.3 billion) in 2012. Earnings then declined to $2.29 a unit (or $709.5 million) in 2013, and fell to $0.40 a unit (or $141.7 million) in 2015.

Cash flow tells a different story

Most REIT investors focus on cash flow instead of earnings, as this measure disregards non-cash items like depreciation. RioCan’s cash flow per unit rose 21.7%, from $1.29 in 2011 to $1.57 in 2015.

Another part of RioCan’s growth strategy involves expanding in densely populated urban areas. It typically forms joint ventures with other property developers to build mixed-use retail, office and residential buildings. Under these deals, RioCan manages the retail portion of the properties.

Nice recovery following Target’s exit

The trust is also doing a good job finding new tenants for the 26 stores previously occupied by Target Corp., which closed its Canadian operations in May 2015. If it finalizes all of these leases, the annual rental income of $12.4 million will be 14% more than what it would have gotten from Target.

RioCan continues to pay a monthly distribution of $0.1175 a unit, for a 5.0% annualized yield. In the past 12 months, distributions accounted for 89.2% of its cash flow. The units also trade at a reasonable 18.5 times RioCan’s likely 2016 cash flow of $1.51 a unit.

RioCan is a buy.

The post RIOCAN REAL ESTATE INVESTMENT TRUST $28 appeared first on TSI Wealth Network.

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.

ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST $35.96 (Toronto symbol AP.UN; Units outstanding: 78.5 million; Market cap: $2.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.2%; www.alliedreit.com) owns 150 office buildings, mostly in major Canadian cities. These properties—mainly Class I—contain over 10.5 million square feet of leasable area.

Class I refers to 19th- and early-20th-century industrial buildings that have been converted to retail space. They usually feature exposed beams, interior brick and hardwood floors.

Allied spent $42.9 million acquiring two properties in the three months ended March 31, 2016. That’s on top of the $164.8 million it spent to buy five properties in 2015.

The new buildings helped raise the trust’s revenue by 4.8% in the quarter, to $93.8 million from $89.5 million a year earlier. Cash flow per unit rose 5.9%, to $0.54 from $0.51.

The units trade at 15.4 times Allied’s forecast 2016 cash flow of $2.34 a unit. They yield 4.2%.

Allied Properties REIT is a buy.

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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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