Tuesday, February 26, 2013

Canadian Real Estate Investment Trust

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.

Dividends have been increasing by 2.17% and 2.09% per year over the past 5 and 10 years. This is slightly faster than inflation as inflation has been increasing by 1.8% and 1.83% per year over the past 5 and 10 years. (I used information from the Bank of Canada to get inflation rates.)

REITs tend to give good dividend and what you expect is that the dividends (or distributions) will increase at or slightly above the rate of inflation. The current dividend rate under this REIT is 3.32%. The latest dividend increase was 4% for 2013.

The Dividend Payout Ratios are high as far as earnings go with the 5 year median at 119% and for the financial year of 2012 at 125%. However, DPR for cash flow is fine with a 5 year median at 64% and for the financial year of 2012 at 56%. The DPR for the 2012 financial year for FFO is 56% and for AFFO is 62%.

Shareholders have done well over the past 5 and 10 years, with Total Return at 12.73% and at 19.03% per year, respectively. The dividend portion of this return is 4.16% and 6.42% per year, respectively. The capital gain portion is 8.58% and 12.61% per year, respectively.

The outstanding shares have increased by 2.4% and 4% per year over the past 5 and 10 years. The shares have increased due to new stock issues and DRIP and they have decreased through share buy backs.

Revenue has increased by 5.1% and 8.7% per year over the past 5 and 10 years. Revenue per Share has increased by2.7% and 4.9% per year over the past 5 and 10 years. Looking at the 5 year running Revenue per Share, this has increased by 3.7% and 4.7% per year over the past 5 and 10 years. Revenue increases per Share is a little low.

Earnings per Share have gone down by 3% per year over the past 5 years. EPS has not increased over the past 10 years. (However, if you look at the 5 year running EPS over the past 5 years this has increased by 5.7% per year. Sometimes looking at 5 year running averages is better rather than looking only at specific points in time.)

Funds from Operations (FFO) have increased by 4.5% and 7% over the past 5 and 10 years. Adjusted Funds from Operations (AFFO) have increased by 5.5% over the past 5 years. (AFFO has not been around as long as FFO has.)

Cash flow has increased by 7.48% and 7.86% per year over the past 5 and 10 years. Book Value per share has been increasing also, but there was a big increase in Book Value due to the change in accounting rules to IFRS and this shows BVPS changing at a much higher than it probably really is. (Accounting is just as much an art as it is a science.)

Until the last couple of years, ROE was very good for this stock. Since 2011 when BVPS was pushed up the ROE has been rather low and coming in at just 4.7% for the 2012 financial year. For the 2012 financial year, the ROE on comprehensive income was close to the ROE on net income with an ROE of 4.8%.

The Liquidity Ratio is not as important on REITs as it is for other stocks. The current one I calculate to be around 0.90. However, the stock has a good cash flow. Debt Ratio is good at 1.87. The Leverage and the Debt/Equity Ratios are fine at 2.14 and 1.14, respectively.

You would buy a REIT to diversify a portfolio. They provide a decent income which should increase at or slightly above the inflation rate. They will also provide a decent rate of capital gain. They are, of course, subject to the risk of real estate investing and in this case to the risks of commercial real estate investing.

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.

2 comments:

  1. Thanks for such a great article to share with. Before diving into an investment, there are several things to consider and those information would really help.

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  2. Investing in real estate is as advantageous and as attractive as investing in the stock market. Thanks for your post.

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