Thursday, March 8, 2012

Canadian Real Estate Investment Trust 2

As I mentioned yesterday, I have been interviewed by Money Sense Magazine. In an email my interviewer said that they would not mention my blog because there was not enough space. When I was interviewed by Me and My Money in the Globe, they also did not mention my blog. However, they did mention blogs when they were written by men. Do people have something against female bloggers? Just asking.

Now, back to the stock I want to review. This stock is Canadian Real Estate Investment Trust (TSX-REF.UN). I bought this in September 2006 and since that time I have made a total return of 11.8% per year. The portion of my total return attributable to distributions is 4.7% or 40% of my return.

When I look at insider trading, I find no insider selling and $1M of insider buying. Contrast this with the orgy of insider selling of $53.6M for RioCan. RioCan has always had insider selling, but nothing like the amount over the past year. CDN REIT’s use of options is much more muted than a lot of companies. Also, a lot of insiders hold shares worth in the 100s of thousands of dollars. The CEO shares are worth just over $26M.

Some 91 institutions hold some 61% of the units of this company. Over the past 3 months institutions have bought and sold units and they have marginally increased their investment in this company by 2.6%.

The current P/E is around 44.05 as no one seems to think they will earn much over the next few years. Looking at Funds from Operations, the high and low 5 year median P/FFO ratios are 14.08 and 11.48. The current one is 15.7, which shows a relatively high stock price. Adjusted Funds from Operations show a similar pattern, with the high and low 5 year median P/AFFO ratios being 16.35 and 13.26 and the current one at 17.58.

There was a 98% increase in the Book Value under the new accounting rules, so I see no sense in looking at the Price/Book Value ratios. The Graham Price is affected by Book Value and EPS, so I do not care to use this test either. Looking at Price/Cash Flow, I get low and high 5 year median P/CF Ratios of 12.32 and 15.19. I get a current P/CF of 15.45. This shows a relatively high stock price.

As far as Dividend Yield goes, I get a current one of 3.76% and a 5 year median of 4.64%, which is some 19% higher. This suggests a rather high stock price also. By the way, the 10 year median high dividend yield is 4.52%, which is also above the current dividend yield.

When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold. The consensus is a Hold. There is nothing unusual here.

One analyst said that this company has a long track record of solid and stable performance and a conservative strategy. A third of their operating income comes from Alberta, so this company relies quite heavily on the energy sector of Alberta. Some see this in a positive light and some do not. A number of analysts mention good management and high quality assets. One thinks it is a long term hold. A number liked the 70% payout ratios.

One analyst with a Hold recommendation gave a 12 months stock price of $39 and another with a Buy recommendation gave a 12 month stock price of $40. They are not that far apart.

One blogger talks about the 12 Top Real Estate Stocks in Canada. He mentions CDN Real Estate. A globe and mail article talks about why Canadian REITS are expensive. The dividend ninja recently talked about why he loves REITS.

I have done better with RioCan, but CDN over last 5 and 10 years has really done better than RioCan. For CDN the 5 and 10 year total return is 6.5% and 18%. For RioCan the 5 and 10 year total return is 6.3% and 15.8%. Insiders’ of CDN seem more committed to the company by holding shares. They have not have the massive sell off the RioCan had last year. They do not have the options to do this in the first place.

Maybe I should have increased my shares in CDN rather than RioCan when I wanted to buy more REIT shares in 2010 and 2011. But, on the other hand, most analysts think that RioCan will do much better CDN on a go forward basis. Perhaps neither is a good buy at present because according to by spreadsheets they are both overpriced.

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.


  1. I love reading your blog Susan. So much great info on stocks,

    You really have a way of explaining things, that even a newbie like me can understand.
    Keep up the great writing and I and many others will continue to enjoy.

  2. Susan has a great blog, I agree :)