Calloway Real Estate Investment Trust

I do not own this stock (TSX-CWT.UN). This is one of a few REITs and Real Estate companies that I follow. Like a lot of Real Estate companies, the company has problem raising their distributions lately. They have not increased them since 2008. Well, at least it did not lower it distribution.

They are paying out a high percentage from their Funds from Operations (FFO). Last year it was 94%, but it is expected to be lower this year at 92%. (Using Distributable Income, I have a 5 year median payout ratio of 93%. However, how Distributable Income has been calculated has been changing, although mostly people are now using FFO and sometime AFFO (Adjusted Funds from Operations), currently.)

I have a 5 year distribution growth rate of 2.5% and a 7 year distributions growth rate of 4%. Note that REITS tend to payout all that they can in distributions. This leaves little room for growth. The desirable growth in distributions for REITS is at, or slightly better than the rate of inflation. However, distribution yield tends to be good. This REIT has a 5 year median distribution yield of 7%. Current yield is lower, at 5.7%.

The total returns on this stock has been quite good, considering that we have not yet come out of the recent recession. I think that any company producing a 5 year total return is probably doing ok. For this company, if you had held the stock for 5 years, your total return would be around 6% per year, with 6.5% per year of that coming from distributions. (That means there was negative capital gain.)

This company has grown tremendously over the past 10 years. The total return over the past 10 years is 50% per year, with 19% per year of this total from distributions. However, you should not expect such growth in the future. Growth really slowed down when this stock started to pay out distributions in 2002. Since then, the stock has only produced total returns of around 16.5% with 7.9% of that from distributions.

The other thing to mention about this stock is the rapid growth of equity units. This stock has a 10 year median growth in equity units of 22.7% per year. This shows up in things like revenue. Revenues have growth over the past 5 and 10 years at the rate of 20% and 81% per year. However, Revenue per Share has, over the past 5 and 10 years only grown at the rate of 8% and 4.6% per year.

Distributable income per share has grown at the rate of 2.4% and 9.5% per year over the past 5 and 7 years at the rate of 2.4% and 4% per year. (This is similar to the distribution growth rates.) EPS have negative growth, but they have had no years of EPS loses. Over the past 5 and 10 years, cash flow per share has grown at 0% and 7% per year.

Also Book Value per share has grown over the past years at 20.5% per year. However, Book Value per share has declined over the past 5 years by 2% per year. (Note this often happens on REIT stocks, because they pay out in distributions more than they earn.)

For this stock, debt ratios are fine. The current Asset/Liability Ratio at 1.73 is good. The current Leverage and Debt/Equity Ratios are ok at 2.81 and 1.62 respectively.

Return on Equity has always been rather low for this stock. The 5 year median ROE is just 1.6%. The ROE for the financial year ending in 2010 was only .7%.

This company is also currently in the process of issuing more shares to raise money by issuing more shares. This is how this company seems to be growing, by issuing new shares. As a shareholder, the only growth rates you should be interested in are that per share, because this is what affects you as a shareholder. This stock has not done badly in providing income for its shareholders. Tomorrow, I will discuss what the analysts currently say about this stock and what my spreadsheet says about the current price.

Calloway REIT is the largest owner of large-format unenclosed retail properties in Canada. Its web site is here Calloway. See my spreadsheet at cwt.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.