First Capital Realty

Sound bite for Twitter and StockTwits is: Dividend Growth REIT. Price is probably reasonable, but some tests show it as expensive. They have not raised their dividends for a couple of years, but this is typical of this company. See my spreadsheet on First Capital Realty.

I do not own this stock of First Capital Realty (TSX-FCR, OTC-FCRGF). In 2011 a reader asked me to review this real estate stock. Also, the site Canadian Dividend Stock site mentions this company as a top Canadian REIT.

Net Insider Selling (NIS) for 2017 is at 0.08% of the stock's market cap. However, all the selling is by officers. You never know why people sell, but a few officers have left this company in the past year. In contrast the Chairman has increased his holdings of share by 7.8% and the CFO by 2.8%. A 10% holder called Gazit Canada Inc. controlled by Chaim Katzman and with Dori Segal as president (the current Chairman of FCR) has sold 10% of their stake in this company.

Since the outstanding shares have increased by 6.44% and 7.29% per year over the past 5 and 10 years, you should be looking at the per share values to get an accurate handle on growth. This can make a difference. For example, Revenue has grown at 5.13% and 7.35% over the past 5 and 10 years. However, Revenue per Share as declined by 1.24% and grown by 0.05% per year over the past 5 and 10 years.

The 5 year low, median and high median Price/Earnings per Share Ratios are 16.38, 18.045 and 19.71. The corresponding 10 year ratios are 18.73, 20.21 and 21.68. The corresponding historical ratios are 18.68, 19.90 and 22.25. The current P/E Ratio is 9.01 based on a current stock price of $20.90 and 2017 EPS estimate of $2.32. The P/E Ratio for 2018 is 25.80 based on a stock price of $20.90 and 2018 EPS estimate $0.81. This stock price testing for suggests that the stock price is relatively cheap for 2017.

EPS for this stock tends to be quite volatile as is the EPS estimates given. A better measure might be using the Price/Funds from Operations (FFO) Ratio. The 5 year low, median and high median Price/FFO Ratios are 17.26, 18.49 and 17.26. The 10 year corresponding ratios are 15.80, 17.27 and 18.77. The current P/FFO Ratio is 17.86 based on FFO estimate for 2017 of $1.17 and a stock price of 20.90. The 2018 P/FFO Ratio is 16.85 based on FFO estimate for 2018 of 1.27 and a stock price of $20.90. This stock price testing suggests that stock price is relatively reasonable and below the median.

A problem with FFO is that how it is calculated has changed over time. It used to be called Distributable Cash. However, this can be true of a number of things. For example, how EPS is calculated has also changed over time as has all accounting rules. Accounting rules in Canada used to be under Canadian GAAP and are now under IFRS, but there are always amendments. To get an idea of this visit Deliotte’s site.

I get a Graham Price of $22.32. The 10 year low, median and high median Price/Graham Price Ratios are 0.89, 0.98 and 1.07. The current P/GP Ratio is 0.94 based on a stock price of $20.90. This stock price testing suggests that the stock price is relatively reasonable and below the median.

The 10 year Price/Book Value per Share Ratio is 1.19. The current P/B Ratio is 1.10 a value some 7.2% lower. The P/B Ratio is based on Book Value of $4,618M, BVPS of $18.93 and a stock price of $20.90. This stock price testing suggests that the stock price is relatively reasonable and below the median.

The Book Value has been growing at the rate of 4.86% and 8.58% per year over the past 5 and 10 years. The Book Value after stalling a bit in value in 2014 and 2015 grew by 6.75% in 2016 and 9.87% so far in 2017.

The historical median dividend yield is 5.45%. The current dividend yield is 4.11% based on dividends of $0.86 and a stock price of $20.90. The current dividend yield is some 24.5% lower than the historical median. This stock price testing suggests that the stock price is relatively expensive.

The dividends have not grown much lately. The 5 and 10 year dividend growth is at 1.46% and 1.21% per year. The last time there was a dividend increase was in 2014 when the increase was for 2.4%. With REITs you expect a good dividend (4 and 5% range) and growth at least at the rate of inflation. As far as I can gather from the Bank of Canada inflation for the past 5 years is at 1.55%, so the increase at 1.46% over the past 5 years for this REIT is lower, but not by much.

They can afford their dividends as the Dividend Payout Ratio for 2016 is 54.1% with 5 year coverage at 65.9%. However, coverage of dividends is better gauged with CFPS or FFO. The coverage with CFPS is at 49.9% with 5 year coverage of 45.8%. This is a little high as 40% is a better coverage rate. The coverage with FFO is at 77.5% for 2016 with 5 year coverage at 82%. This coverage is just fine for FFO.

The 10 year median Price/Sales (Revenue) Ratio is 5.77. The current P/S Ratio is 7.23 a value some 25% higher. The current P/S Ratio is based on Revenue of $705M, Revenue per Share of $2.89 and a stock price of $20.90. This stock price testing suggests that the stock price is relatively expensive.

When I look at analysts' recommendations, I find Strong Buy (2); Buy (4) and Hold (2) recommendations. The consensus would be a Buy. The 12 month stock price is $23.38. This implies a total return of 15.98% with 11.87% from capital gains and 4.11% from dividends based on a current stock price of $20.90.

The company talks about their third quarterly results on Cision. Armando Maloney on Simply Wall Street takes a look at this stock. I wonder how valid P/E Ratios are for REITs. Will Ashworth on Motley Fool discusses this stock. See what analysts are saying about this REIT at Stock Chase. They mostly like it.

First Capital Realty is Canada's leading owner, developer and operator of supermarket and drugstore anchored neighbourhood and community shopping centers located predominantly in growing metropolitan areas.. Its web site is here First Capital Realty.

The last stock I wrote about was about was DHX Media Ltd (TSX-DHX.B, OTC-DHXMF)... learn more. The next stock I will write about will be Stella-Jones Inc. (TSX-SJ, OTC- STLJF)... learn more on December 15, 2017 around 5 pm. Tomorrow on my other blog I will write about Dividends.... learn more on Thursday, December 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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