RioCan vs SmartCentres: The Better REIT for Right Now

Real estate investment trusts (REITs) are some of the best income-producing investments on the market. Not only do they allow investors access to the real estate market without owning property, but they can also provide a monthly income stream, just like a landlord. But what is the better REIT for your portfolio?

The market gives us plenty of options to choose from. Two great picks that resonate with investors are RioCan Real Estate (TSX:REI.UN) and SmartCentres (TSX:SRU.UN).

Here’s a look at both stocks and a case for which one is better for your portfolio.

RioCan REIT

RioCan is one of the largest REITs in Canada. The company manages a portfolio of approximately 180 properties that are situated in predominantly major metro markets across Canada.

RioCan’s portfolio was historically focused more on commercial retail sites. In recent years, the company has shifted more to mixed-use residential sites in major metro markets. That shift includes redeveloping some existing retail sites and creating residential units in high-traffic areas.

The demand for residential and the appeal of properties in high-traffic markets have helped RioCan’s occupancy rate remain north of 98%. Additionally, the REIT also boasts a strong pipeline of new developments that will continue to fund growth.

As an income-producer, RioCan offers a yield of 5.79%. This means that a $20,000 investment in RioCan will generate a monthly income of $96. Investors who aren’t ready to draw on that income can reinvest those distributions, allowing them to continue compounding.

That impressive portfolio, along with the monthly income, helps to make RioCan one of the better REIT investments to consider right now.

SmartCentres REIT

SmartCentres REIT is another compelling REIT option for investors to consider. The REIT operates a portfolio of 195 properties across Canada. That portfolio comprises some of the largest commercial retail players on the market.

SmartCentres’ portfolio comprises commercial, office, residential, and industrial space. The company also boasts an impressive 98% occupancy rate and a multi-billion-dollar development pipeline.

SmartCentres backlog includes a focus on residential properties. Specifically, this includes high-rise properties, seniors housing, and purpose-built rentals. That growing diversification is an appealing factor for income-seeking investors and shouldn’t be dismissed when determining the better REIT to buy.

That income stream is impressive. As of the time of writing, SmartCentres monthly distribution offers a yield of 6.78%.

Using that same $20,000 example, investors can expect to earn a monthly income of $112.

Which is the better REIT for your portfolio?

Both RioCan and SmartCentres offer solid recurring revenue streams and well-funded development pipelines. Both are embracing a larger share of residential properties while also growing on the retail side.

One key difference between the two REITs is their balance sheet posture. RioCan has historically maintained a more conservative leverage profile, making it appealing to investors seeking stability.

SmartCentres, by contrast, carries heavier development commitments, which can provide long‑term upside growth that investors seek, but it also increases the short‑term cash flow pressure.

Another important contrast is tenant mix. SmartCentres benefits from retail‑anchored sites that drive consistent traffic and long‑term lease stability.

RioCan’s shift toward mixed‑use communities diversifies its income base while reducing its reliance on more traditional retail cycles.

Investors looking for higher monthly income will lean towards SmartCentres with its big-name anchor tenants that provide recurring revenue. RioCan’s increasing focus on residential makes it an appealing option to investors seeking an investment resembling more of a traditional real estate rental.

Both REITs have been pressured by the higher‑rate environment, which has weighed on valuations across the sector.

As interest rates stabilize, REITs with strong development pipelines and high occupancy rates, like RioCan and SmartCentres, are often among the first to rebound.

Which one is the better REIT?

Ultimately, the better REIT comes down to your objective: SmartCentres for higher income today, or RioCan for a steadier, more diversified long‑term growth profile.

The post RioCan vs SmartCentres: The Better REIT for Right Now appeared first on The Motley Fool Canada.

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More reading

• These Are the Best Canadian Stocks for Value in the World Right Now
• Use a TFSA to Make $500 in Monthly Tax-Free Income
• 1 Canadian REIT Offering an Outstanding Yield
• 3 Top Canadian Stocks to Add to Your TFSA
• Transform Your TFSA Into a Cash-Crushing Machine With Just $20,000

Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned. The Motley Fool recommends SmartCentres Real Estate Investment Trust. The Motley Fool has a disclosure policy.