Canadian Real Estate Investment Trust 2

On my other blog I am today writing about expanding CPP...continue...

I own this stock of Canadian Real Estate Investment Trust (TSX-REF.UN, OTC-CRXIF). To diversify my portfolio, I have invested in some REITs. I have only invested in REITs that have commercial properties. I bought this stock in September 2006 and since that time I have made a total return of 13.14% per year. Of this total return, 4.49% per year is from dividends and 8.65% per year is from capital gains.

When I look at the insider trading report, I see insider buying of $1.1M and no insider selling. Insiders were buying stocks at priced from $40.50 to $44.60. I can only find one insider that has options and this is a Subsidiary Executive with $0.7M in options. The CEO has $18M in shares and the CFO has $4.8M in shares.

When looking at the stock price, I do not think that looking at Price/Earnings is the way to go. It is presently at 48.26 and I think that it does not reflect anything about the stock price. Using Graham Price is a bit iffy also as part of the formula uses EPS.

The Price/Book Value per Share Ratio is a good place to start. The 10 year median P/B Ratio is 2.13. The current ratio based on a stock price of $43.33 is 1.73 based on a stock price of $43.33. The current P/B Ratio is 82% of the 10 year median Ratio. For a stock to be cheap, the current P/B Ratio would have to be only 80% of the 10 year median Ratio. So this test shows that while the stock price is not quite in the cheap category, it is certainly reasonable.

The dividend yield tells another story. The 5 year median dividend yield is 4.64% and the current dividend yield at 3.58% is 23% lower. The current dividend yield is quite low for a REIT. TD gives the Industry average as 5.12%.

If you look at Price/Cash Flow per Share Ratio, I get a get 5 year low, median and high median P/CF Ratios of 12.32, 13.76 and 15.19. Based on current stock price of $43.33 and 2012's CFPS of $2.61, the current P/CF ratio is 16.59. This shows that the stock price is relatively high.

Often FFO and AFFO values are used in connection with REITs. If you look at 5 year low, median and high median Price/FFO Ratio you get ones of 11.41, 12.74 and 14.08. Using the current stock price of $43.33 and the 2013 FFO $2.76, the P/FFO Ratio is 15.70. If you look at 5 year low, median and high median Price/AFFO Ratio you get ones of 13.26, 14.80 and 16.35. Using the current stock price of $43.33 and the 2013 FFO $2.51, the P/FFO Ratio is 17.26. Both these tests show that the stock price is relatively high.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold. The consensus recommendation is a Buy. The 12 month consensus stock price is $47.70. This implies a 13.67 total return with 3.58% from dividends and 10.09% from capital gains.

Deloitte puts out an interesting guide to REITs. The Jags Report talks about some analysts raising their 12 month stock price on this stock. The Canadian Money Forum has a discussion on the relative merits of this stock and RioCan.

I like this stock and will buy some more in the future. However, all the indictors I see show that this stock is currently relatively 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. Its web site is here CDN REIT. 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 or StockTwits.