Wednesday, March 23, 2011

Canadian Real Estate Investment Trust 2

I bought this stock (TSX-REF.UN) in September 2006. I have made a total return of 10.1% per year on this stock. I estimate that the dividend portion of my total yearly return would be between 5% and 5.5%. I feel that this stock has been a decent investment for me and has provided me with some good income and a good rate of return.

When I look at the Insider Trading report, I find that there has been a bit of Insider Selling and a bit of Insider Buying. There is a net to insider selling. All the buying seems to be by the directors under the company’s stock buying plan. All the selling was by the CFO. This company has recently raised their income by 2.2%, which for this company is a good increase. The other thing to note is that insiders do own shares, but no one has any stock options.

I get a 5 year median low Price/Earnings Ratio of 17.7 and a 5 year median high P/E Ratio of 24.6. I get a current P/E of 26.7. This is because analysts that are quoting next year’s earnings think that it will be significantly lower than for 2010. The P/E based on last year earnings is just 13. However, the Price/Cash Flow Ratio average is 13 and the current P/CF is 14. These ratios are much closer. Looking at Price/Funds from Operations Ratio, I get a current one of 13.7 and with a 5 year average high of 14.5 and a 5 year average low of 10.5. These other ratios do not look as bad as the current P/E ratio does.

Since the Graham Price is based on estimated earnings for 2011, it is way below the current stock price of $32.28 by 74%, as it is only $18.59. The 10 year average Price/Book Value Ratio is 2.04 and the 5 year P/B Ratio is 2.54. The current P/B Ratio of 2.54 is the same as the 5 year average, but below the 10 year average by 25%. Because this is an Income Trust, Book Values grow slowly.

When looking at the yield, the current one of 4.4% is below the 5 year average of 5%. Please note that some people think that the only stock price comparison you should use is the yield. By this measure, the stock price is a bit high. Also, note that the 10 year average high yield is 6% and the 5 year average low yield is 4.2%.

I did not look at the debt ratios yesterday and I will cover this today. The debt ratios are all fine. The Liquidity Ratio tends to bob around quite a bit, but all values are rather small. The Asset/Debt ratios are good with a current one of 1.65 and a 5 year average of 1.52. The Leverage Ratio is 2.56 and the Debt/Equity Ratio is 1.55. Both these are fine.

When I look at analysts recommendations, I find Strong Buy, Buy and Hold recommendations. There are lots of Strong Buys and Holds. The consensus is probably a Buy. (See my site for information on analyst ratings.) The 12 month target for Hold is $34 and the 12 month target for a buy is $35.75. Analysts talk about this company having good occupancy rates.

One analyst says that this company has good properties and it is well managed. Another analyst mentions its low payout ratio compared to cash flow. This Payout Ratio is currently at 61% and the 5 year average is just 68%. It also has a low Payout Ratio compared to the FFO and this is running at around 61%. One analyst is rating this a Hold because he thinks it is a little pricey at the moment.

As I said yesterday, I have been pleased with my investment in this company and I will continue to hold the shares that I own.

I have one final remark. I know that the past couple of weeks have been part exciting and part harrowing, what with the problems in Libya (and the rest of the Middle East) and Japan. I have been though such weeks before and I am not worried about my investments because in the long term they will be just fine. I certainly hope that the people of the Middle East will be able to get the sort of governments they desire. I also pray for all those in Japan and I hope their problems are over soon.

Canadian Real Estate Investment Trust is an equity real estate trust, which acquires and owns a portfolio of income-producing properties. It specializes in the acquisition and ownership of community shopping centers, industrial and office properties across Canada. This company owns office, industrial, retail properties and some miscellaneous items such as apartment buildings. This stock is rated STA-3M by DBRS. Its web site is here CDN Real Estate. See my spreadsheet at ref.htm.

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 for stocks followed and investment notes. Follow me on twitter.

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