RioCan Real Estate Investment Trust (TSX:REI.UN) is a beaten down stock/REIT with a high dividend yield. Down 29.4% over the last five years, it has given investors a volatile ride. However, as a result of the downward trending unit price, REI.UN now pays investors a very juicy 5.9% dividend yield.

The question is whether RioCan's dividend is worth it today. Although 5.9% per year is a lot, that much over five years is just enough to offset a 29.4% capital loss, for a 0% total return. That's assuming that an investor bought today and saw the shares fall another 29.4%; the actual five-year total return has been less than 0%, as the investors of five years ago bought at a lower yield. Also, they saw the dividend they'd been receiving slashed by 33% in 2020 – a cut that the company is only just now starting to reverse.

RioCan definitely gave investors a difficult ride over the last five years. Now, however, the real estate investment trust (REIT) may be in a better place. RioCan's revenue and earnings both increased in the trailing 12-month period, and the Bank of Canada's ongoing interest rate cuts should lower the company's interest payments. That doesn't mean that RioCan's earnings are going to continue growing, but it is one encouraging sign that merits further research.

Recent performance

Broadly, RioCan's fundamental performance has been strong in 2024 – or at least stronger than in prior years. In its most recent quarter, the REIT delivered the following metrics:

• $287 million in revenue, up 3.6%.
• $96.9 million in net income, up from a $-73.5 million loss.
• $137.9 million in funds from operations, up 1.8%.
• $25.01 in net asset value (NAV) per share, up 1%.
• A 98.6% occupancy rate.

These metrics were ahead of what analysts expected for the period. The growth rates weren't especially rapid, but RioCan units are cheap, trading at just 10 times earnings and 12.5 times funds from operations. The REIT doesn't need a whole lot of growth to be worth the investment. Also, the company's payout ratio (dividends divided by earnings) is 63%, which is well within the sustainable range. Overall, RioCan is giving investors a lot to be happy about.

Reason for the bad run

Another cause for optimism about RioCan is the reason why it embarked on a five-year bear market in the first place. Put simply, it was a casualty, first of COVID, and then of rising interest rates. In the COVID-19 pandemic, many of RioCan's tenants were put out of work/business and lost their ability to pay rent. RioCan began to recover from that hit after the lockdowns ended; however, troubles again emerged when the Bank of Canada began raising interest rates, which increased RioCan's cost of capital. These last five years were tough ones for RioCan, but today, things are trending in a very different direction than they were in late 2019. So there is cause for optimism.

Why things appear likely to turn around

2024 is a very different environment than 2019 was. We aren't looking at another COVID-like event, interest rate hikes, or anything of that nature. Instead, the Bank of Canada is cutting rates. This means that the macroeconomic climate is more fortuitous for RioCan today than it was five years ago. That doesn't guarantee that the stock will do well, but it does provide shareholders with cause for optimism.