Smart REIT

Sound bite for Twitter and StockTwits is: Dividend Growth REIT. The current price certainly seems good at the present time. I would like to see a better Liquidity Ratio. See my spreadsheet on Smart REIT.

I do not own this stock of Smart REIT (TSX-SRU.UN, OTC-CWYUF). Once you have 5 or 6 stocks, you might want to consider a REIT for diversification. REITs are an easy way to investment in real estate. I am therefore following a few REIT stocks and in 2009 I decided to look at a few on the Dividend Achiever's List. Unfortunately, this stock is no longer on the Dividend Achiever's List.

What I noticed when updating the spreadsheet is that this company has a very high distribution yield at 5.65% but it has a very low distribution growth. They did not increase the distribution at all between 2009 and 2013. Since then the distributions have increase at around 3% per year. However, the growth over the past 5 and 10 years is 1.39% and 1.21%. According to the bank of Canada inflation over the same period was at 1.33% and 1.46%. With very low inflation this is not very good. You expect a REIT to increase just a bit above inflation or at inflation.

The Liquidity is very low coming in at just 0.23. If this is below 1.00 it means that the current assets cannot cover current liabilities. With this company adding in cash flow after distributions just increases it to 0.31. If you include only distributions paid in cash it is 0.43.

You only get it to a decent rate by adding back in current portion of long term debt. This means that every year you have to check to make sure that they are handling outstanding long term debt. For 2016 annual statement they cover this question. For any year, the company should answer this question in the annual statement in the notes on the Financial Statements.

This REIT's debt ratio is good at 2.14 for the financial year of 2016. Also the Leverage and Debt/Equity Ratios are good for this company at 1.87 and 0.87 for the financial year of 2016.

The Return on Equity is on the low said at 8.3% for the 2016 financial year and with a 5 year median value of 8.3%. The Comprehensive Income ROE is the same at 8.3% for 2016 with a 5 year of 8.3%.

The outstanding shares have increased a lot of the years. Outstanding shares have increased by 4.6% and 5.6% per year over the past 5 and 10 years. This means that to judge growth you need to look at per share values. It can make a difference. For example the growth in revenue over the past 5 and 10 years is at 5.9% and 8.9% per year. However, the real growth is the growth in revenue per share which is at 1.2% and 3.1% per year over the past 5 and 10 years.

The 10 year low, median and high median Price/Earnings per Share Ratios are 11.75, 13.56 and 14.54. The 10 year corresponding values are 12.79, 15.43 and 16.99. The historical values are 12.17, 13.83 and 15.29. The current P/E Ratio is 11.93 based on12 month EPS to the end of the second quarter of $2.52 and a stock price of $30.11. This stock price testing suggests that the stock price is relatively reasonable and below the median to relatively cheap.

This is a REIT so often people look at Price/Funds from Operations Ratio or Price/Adjusted Funds from Operations Ratio. I will use the P/FFO Ratio. The 10 year low, median and high median P/FFO Ratios are 12.98, 14.69 and 16.19. The current P/FFO Ratio is 13.62 based on a stock price of $30.11 and 2017 estimate FFO of $2.21. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a Graham Price of $35.51. The 10 year low, median and high median Price/Graham Price Ratios are 0.82, 0.91 and 0.99. The current P/GP Ratio is 0.85 based on a stock price of $30.11. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.27. The current P/B Ratio is 1.19 a value some 6.8% lower. The current P/B Ratio is based on a Book Value of $3,914M, Book Value per Share of $23.36 and a stock price of $30.11. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get an historical median distribution yield of 5.93%. The current distribution yield is 5.65% based on distributions of $1.70 and a stock price of $30.11. The current distribution yield is some 4.8% below the historical median distribution yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.

The 10 year median Price/Sales (Revenue) Ratio is 6.08. The current P/S Ratio is 6.26 a values some 3% higher. The current P/S Ratio is based on 2017 estimate Revenue of $742M, Revenue per Share of $4.81 and a stock price of $30.11. This stock price testing suggests that the stock price is relatively reasonable and above the median.

When I look at analysts' recommendations, I find Strong Buy (1), Buy (5) and Hold (3). Most are a Buy and the consensus is a Buy. The 12 month stock price is $35.03. This implies a total return of 21.99% with 16.34% from capital gains and 5.65% from distribution on a current price of $30.11.

Staff at Benton Bulletin give some technical analysis. They say that the RSI is reading the stock as neither overbought nor oversold. David Jagielski at Motley Fool says that this is a quality stock trading at market lows. Rex Bailey on Weekly Herald say that the Scotiabank recently dropped their target price on this company. (Note some US sites still have symbol at CWT.U or CWT.UN)

Smart REIT is the largest owner of large-format unenclosed retail properties in Canada. Its web site is here Smart REIT.

The last stock I wrote about was about was High Liner Foods (TSX-HLF, OTC-HLNFF)... learn more. The next stock I will write about will be Just Energy Group Inc. (TSX-JE, NYSE-JE)... learn more on Friday, September 15, 2017 before 8 am. Tomorrow on my other blog I will write about Money Show 2017 - Gordon Pape... learn more on Thursday, September 14, 2017 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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