Granite REIT

Sound bite for Twitter and StockTwits is: Dividend Growth REIT. Results of stock price testing is that the stock price could still be reasonable, but it would be in the top of the reasonableness range. Debt Ratios are fine, but Liquidity Ratio could be improved. The Dividend Payout Ratios (DPR) are fine for the AFFO and FFO Ratios. The current dividend yield is moderate with dividend growth low. See my spreadsheet on Granite REIT.

Is it a good company at a reasonable price? I have some REITs for diversification purposes. They are not my favourite dividend stocks as you tend to get high dividends, but little in the way of growing dividends. This seems like a reasonable REIT to buy for diversifications purposes. A number of tests show this stock as being expensive. But, then a number of tests also show it is reasonable and below the median. It is certainly not cheap, but maybe in the high end of the reasonableness range according to the 10 year dividend yield test.

I do not own this stock of Granite REIT (TSX-GRT.UN, NYSE-GRP.U). I first bought some of this stock in 2003 when it was called MI Developments (TSX-MIM.A). It was a company connected with Frank Stronach and Magna. TD bank also had an Action Buy Call (Strong Buy) on this stock. By the December 2006, it was doing well and my stock was up some 15% per year. I bought some more. The year of 2006 was the last time I did well on this stock. It kept going down and I sold it in 2009; being discourage it would ever do well again.

When I was updating my spreadsheet, I noticed this stock is currently doing quite well. There is some insider buying. Net insider buying is 0.01%.

If you had invested in this company in December 2013, for $1,005.16 you would have bought 26 shares at $38.66 per share. In December 2023, after 10 years you would have received $739.21 in dividends. The stock would be worth $1,983.28. Your total return would have been $2,722.49. This would be a total return of 12.46% per year with 7.03% from capital gain and 5.43% from dividends.

Cost	Tot. Cost	Shares	Years	Dividends	Stock Val	Tot Ret
$38.66	$1,005.16	26	10	$739.21	$1,983.28	$2,722.49

The current dividend yield is moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 4.03%. The 5, 10 and historical median dividend yields are also moderate at 4.23%, 4.99% and 4.23%. The dividend growth is low (below 8% per year) at 3.3% per year over the past 5 years. The last dividend increase was in 2024 and it was for 3.1%. Dividends are currently paid in CDN$.

The Dividend Payout Ratios (DPR) are fine for the AFFO and FFO Ratios. The DPR for 2023 for Earnings per Share (EPS) is far too high at 153% with 5 year coverage at 82%, but this is not an important ratio for REITS, the ratios for AFFO and FFO are the important ones. The DPR for 2023 for Adjusted Funds from Operations (AFFO) is good at 71% with 5 year coverage at 77%. The DPR for 2023 for Funds from Operations (FFO) is good at 64% with 5 year coverage at 72%. The DPR for 2023 for Cash Flow per Share (CFPS) is too high at 51% with 5 year coverage at 65%. The DPR for 2023 for Free Cash Flow (FCF) is too high at 64% with 5 year coverage at 76%. Here again, there is not much agreement on what the FCF is and MS has again changed FCF for the past 10 years.

Item	Cur	5 Years
EPS	152.92%	82.07%
AFFO	71.12%	76.92%
FFO	64.39%	72.18%
CFPS	50.87%	64.89%
FCF	64.40%	75.52%

Debt Ratios are fine, but Liquidity Ratio could be improved. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.59 and currently at 0.55. The Liquidity Ratio for 2023 is too low at 0.39 and 0.35 currently. If you added in Cash Flow after dividends, the ratios are still too low at 1.53 and currently at 0.64. If you add back in the current portion of the long term debt the ratios are fine at 1.87 and 1.79. The Debt Ratio for 2023 is good at 2.40 and 2.42 currently. The Leverage and Debt/Equity Ratios for 2023 are good at 1.72 and 0.72and currently at 1.71 and 0.71.

Type	Year End	Ratio Curr
Lg Term R	0.59	0.55
Intang/GW	0.00	0.00
Liquidity	0.39	0.35
Liq. + CF	0.68	0.64
Liq. CF Dt	1.87	1.79
Debt Ratio	2.40	2.42
Leverage	1.72	1.71
D/E Ratio	0.72	0.71

The Total Return per year is shown below for years of 5 to 21 to the end of 2023 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.

From	Years	Div. Gth	Tot Ret	Cap Gain	Div.
2018	5	3.28%	13.83%	8.21%	5.40%
2013	10	4.30%	9.54%	4.69%	5.43%
2008	15	10.31%	24.25%	14.61%	8.84%
2003	20	10.12%	7.04%	3.71%	3.08%
2002	21		9.95%	6.00%	3.32%

The Total Return per year is shown below for years of 5 to 21 to the end of 2023 in US$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.

From	Years	Div. Gth	Tot Ret	Cap Gain	Div.
2018	5	3.92%	13.83%	8.21%	5.62%
2013	10	2.05%	9.54%	4.69%	4.85%
2008	15	9.74%	24.25%	14.61%	9.64%
2003	20	10.00%	7.04%	3.71%	3.33%
2002	21		9.95%	6.00%	3.95%

The 5-year low, median, and high median Price/Earnings per Share Ratios are 6.89, 7.97 and 10.51. The corresponding 10 year ratios are 6.48, 7.92 and 9.68. The corresponding historical ratios are 6.89, 7.97 and 9.91. The current ratio is 22.94 based on a stock price of $81.82 and EPS for the last 12 months of $3.57. the current ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.

I also have Adjusted Funds from Operations (AFFO) data. The 5-year low, median, and high median Price/ Adjusted Funds from Operations Ratios are 15.27, 17.38, and 20.91. The corresponding 10 year ratios are 14.10, 16.33 and 19.29. The current ratio is 17.33 based on a stock price of $81.82 and AFFO estimate for 2024 of $4.72. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I also have Funds from Operations (FFO) data. The 5-year low, median, and high median Price/ Funds from Operations Ratios are 14.56, 16.95 and 20.01. The corresponding 10 year ratios are 12.90, 14.95 and 16.86. The current ratio is 15.32 based on a stock price of $81.82 and FFO estimate for 2024 of $5.34. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a Graham Price of $82.95. The 10-year low, median, and high median Price/Graham Price Ratios are 0.51, 0.59 and 0.72. The current ratio is 0.99 based on a stock price of $81.82. This ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.

I get a 10-year median Price/Book Value per Share Ratio of 1.01. The current P/B Ratio is 0.95 based on a stock price of 81.82, Book Value of $5,433M and Book Value per Share of $85.75. The current ratio is 6% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a 10-year median Price/Cash Flow per Share Ratio of 15.28. The current P/CF Ratio is 16.10 based on Cash Flow for the last 12 months of $322M, Cash Flow per Share of 5.08 and a stock price of $81.82. The current ratio is 5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get an historical median dividend yield of 4.23%. The current dividend yield is 4.03% based on a stock price of $81.82 and dividends of $3.30. The current dividend yield is 5% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median dividend yield of 4.23%. The current dividend yield is 4.99% based on a stock price of $81.82 and dividends of $3.30. The current dividend yield is 19% below the historical median dividend 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 9.91. The current ratio is 9.17 based on Revenue estimate for 2024 of $565.6M, Revenue per Share of $8.93 and a stock price of $81.82. The current ratio is 7% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

Results of stock price testing is that the stock price could still be reasonable, but it would be in the top of the reasonableness range. The 10 year dividend yield test is showing the stock price as almost expensive. The P/S Ratio testing is showing the stock as reasonable and below the median. The rest of the testing varies from reasonable to expensive.

When I look at analysts’ recommendations, I find Strong Buy (5), Buy (5). The consensus would be a Strong Buy. The 12 month stock price consensus is $87.90 with a high of $92.00 and low of $84.00. The consensus stock price of $87.90 implies a total return of $11.46% with 7.43% from capital gains and 4.03% from dividends based on a current stock price of $81.82.

Analysts on Stock Chase gives this stock 6 Buys, 1 Hold and 1 Do Not Buy. Stock Chase gives this stock 4 stars out of 5. The Do Not Buy likes the company but says that the real estimate business is not good now. Amy Legate-Wolfe on Motley Fool thinks this is an outstand REIT to buy now. Robin Brown on Motley Fool says with interest rates dropping, now is the time to buy this REIT. The company put out a press release via Stock House about their fourth quarter of 2023. The company put out a press release via Financial Post about their second quarter of 2024 results.

Simply Wall Street has no review of this stock, but on it site it has two warnings of debt is not well covered by operating cash flow; and large one-off items impacting financial results. Simply Wall Street gives this stock 2 and one half stars out of 5.

Granite Real Estate Investment Trust, or Granite, is a real estate investment trust engaged in the acquisition, development, ownership, and management of logistics, warehouse and industrial properties in North America and Europe. Granite's portfolio comprises various manufacturing, corporate office, warehouse and logistics, and product engineering facilities. The company's tenant is Magna International, an automotive parts and systems manufacturer, which accounts for the majority of Granite's lease income. Its web site is here Granite REIT.

The last stock I wrote about was about was Great-West Lifeco Inc (TSX-GWO, OTC-GWLIF) ... learn more. The next stock I will write about will be K-Bro Linen Inc (TSX-KBL, OTC-KBRLF) ... learn more on Wednesday, September 25, 2024 around 5 pm. Tomorrow on my other blog I will write about Compound Interest.... learn more on Tuesday, September 24, 2024 around 5 pm.

This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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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