Monday, March 12, 2012

Calloway Real Estate Investment Trust 2

Calloway Real Estate Investment Trust (TSX-CWT.UN) has a current decent dividend of 5.6%, but the last time they raised the dividend was 2008. The 5 year median Distribution Payout Ratios for Cash Flow is 102% and the one for the end of 2011 is 104%. This is high. The 5 year median DPR based on Fund from Operations and Adjusted Fund from Operations are better at 90% and 94%, respectively.

When I look at insider trading, I find a bit of insider selling and a bit of insider buying, with net insider buying of $0.1M. Insiders may not have options, but they do have something similar called Deferred Units. As far as I can see, CFO and officers have more deferred units than trust units. Also, Mitchell Goldhar has a variety of Trust Units and Limited Partnership Units and the annual statement says he has approximately 21.5% of the units.

Some 94 institutions own some 42% of the outstanding units. Over the past 3 months they have bought and sold units and they have increased their units by 1.4% over this period.

I get 5 year median low and high Price/Adjusted Funds from Operations Ratios of 12.51 and 16.38. The current P/AFFO Ratio of 17.14 on a stock price of $27.43 would imply the current price is high. The 5 year median low and high Price/Funds from Operations Ratio are 12.57 and 16.04. The current P/FFO Ratio of $16.11 would also point to a high stock price.

I am not looking at the Price/Earnings Ratios as the expected EPS are not unduly high compared to the EPS of 2011, but are very high compared to past years. I do not think that using the P/E Ratios will give us a true picture of whether or not the current price is relative high or low. Since the Book Values have generally substantially increased because of new account rules I will not be using the Price/Book Value ratios either. I will also not use the Graham Price as this uses both EPS and Book Value per shares in its formula.

One thing I can use is the Price/Cash Flow Ratios. I get 5 year median low and high Price/Cash Flow Ratios of 13.44 and 18.13. The current Price/CF Ratio of 23.25 would suggest a rather high current stock price. I get a 5 year median Dividend Yield of 6.96% and the current one of 5.64% would also suggest a rather high current stock price. The current dividend yield is also lower than the 10 year median low dividend yield of 5.9%.

When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold. The consensus is a Buy. Analysts seem to mention the fact that they have a big client in Wal-Mart. A couple of analysts says it would be a nice core holding. No one says anything bad about this company, however, one analyst said not to buy at this time because of the high valuation (that is the stock price is too high).

CIBC has given this stock a buy (outperform) rating recently. For information on this, see I stock analysts. They have a target price to $30. Elsewhere CIBC has said they expect Calloway to raise their distributions this year.

The Globe and Mail had a recent article on why REITs are worth the money. It also says that prices are up because retail investors will pay for the good yields from REITs. You might also want to look at CIBC’s Canadian REITs monthly for January 2012 where they compare Canadian REITs. There is also some interesting information on this REIT at Canadian Dividend Stock site.

Cash money 101 has a recent blog entry that talks about REITs that have dividend reinvestment plans and optional cash payments. He does not include Calloway, but does talk about others I have mentioned like CDN REIT, RioCan and H& R. See Cash Money 101.

I think that larger portfolios should have some diversification into REITs. I have a 6.5% exposure to Real Estate, as you can get exposure to this section through other companies than just REITs. Personally, I would not have more than 10% exposure to this sector. You can make some good dividends, but increases are generally in line with inflation.

Personally, I would wonder if now is a good time to purchase REITs as they seem to have relatively high stock prices. I have found that paying too much for a stock affects your long term return on such stocks.

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.


  1. Thanks for this post about Calloway Real Estate Investment. Even though I don't know about this real estate but this information is really helping.

  2. Investing in real estate can potentially generate a lucrative income if done correctly.

    Real Estate Investment