Wednesday, August 5, 2009

RioCan Real Estate

I am reviewing this stock (TSX-REI.UN) today as I have not reviewed it since I received the annual report for the end of December 2008. I first bought this stock in January 1998 and then purchased some more in April 2000, January 2002 and finally in June 2006. To date I have made a return on this stock of 14.5% per year. It is only on that purchased in June 2006 that I have not made a return on these shares. We are in a recession and the stock price has come down from the top made in 2006.

Since I last looked at this stock in April 2009 when I updated the spreadsheet for the annual report, the earnings estimates and the Distributable Cash estimates have come down. Some even currently feel that the distribution is at risk, while others believe that the distributions for 2009 and 2010 will remain at the 2008 level. I have updated my spreadsheet for the June 2009 quarterly report.

If you look at the growth figures for this stock, they are mostly good. The only negative growth has been in earnings. There has been some growth in Distributable Cash over the last 5 and 10 years of 3% and 4.5% respectively. .Many people feel that Distributable Cash is the more important figure for income trusts.

However, the beauty of looking at earnings is that, even though it is a rather fake figure, you can compare companies across many different sectors with this figure, as there are rules for how to calculate it. The problem with the Distributable Cash figures is that we have only recently has gotten rules to calculating this figure. When you try to get the growth of this value, you might not know if the growth figures you get are any good. Until recently, every company had their own way of calculating this figure. I look at both Distributable Cash and Earnings. Whether or not anyone else agrees with me, I do my spreadsheets for me. I am just willing to share them and I am not willing change how I do things unless there is a compelling reason to do so.

Now I will move on to look at the Asset/Liability Ratio. I find the A/L Ratio low at 1.47. It is over 1.00, I know, but I prefer it to be at least 1.50. This stock just misses on this ratio. The Return on Equity (ROE) on this stock has not been bad. For 2008, it was low at only 8.4%. However, the 5 running average ROE to December 2008 was even better at 9.3%. The ROE for the second quarter of 2009 was low and it comes in only at 6.4%; however, the year is just half way through.

I plan to hold on to this stock. The current yield is over 8% and it has a 5 year average yield of 6.7%. I have done well with this stock. I expect, because it is in the Real Estate sector that this stock will not do as well in the next little while but underperformance because of economic conditions is no reason to sell.

This is an equity real estate trust, which owns a portfolio of retail properties across Canada. Its web site is See my spreadsheet at

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. See my website at for a list of the stocks for which I have put up spreadsheets.

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