RioCan Real Estate 2

I own this stock of RioCan Real Estate (TSX-REI.UN, OTC- RIOCF). I first bought this stock in 2000 and I have periodically bought more. I have made a return of 16.66% per year on this stock with 8.15% per year from capital gains and 5.81% per year from distributions.

When I look at the insider trading report, I find $0.6M of insider buying and $12M of insider selling for net insider selling of $11.4M. There seems to be buying under the company plan and the selling seems to be of options. Insiders seem to have lots of options, especial the CEO, CFO and officers. The CEO, CFO and officers have options, but directors have Restricted Equity Units.

The CEO has shares worth $9.6Mand has options are worth $87.7M. The CFO has shares worth $1.8M and has options worth $12.4M. An officer has $0.9M and has options worth $11.1M. A director has some shares and has options worth $0.4M. This is just to give you an idea on insider share ownership and option values.

When trying to judge the stock price, the Price/Earnings look very low at 9.44 when the 5 year low median is at 14.53, but earnings have climbed with the new accounting rules. This P/E Ratio of 9.44 is based on a stock price of $27.56 and 2013 earnings of $2.92. The interesting thing about earnings is that all analysts seem to expect earnings to drop significantly over the next while.

The Price/Book Value Ratio share has a similar problem as the P/E Ratio as the Book Value climbed with the new account rules. Over the past two years, the Price/Graham Price Ratios have also been quite low. However, the Graham price uses the earnings and book value in its formula.

The dividend yield seems to be a good measure to use. The current dividend yield at 5.12% is some 24% lower than the 5 year dividend yield at 6.73%. This suggests that the stock price is rather on the high side.

The 5 year low, median and high median Price/Cash Flow per Share Ratios are 13.12, 15.19 and 18.22. The current P/CF Ratio is 16.91. This suggests that while the stock price is in the reasonable zone, it is a bit high.

Perhaps another good test is the Price/Adjusted Funds from Operations ratio. The P/AFFO Ratios is currently at 16.96 based on a stock price of $27.56 and AFFO for 2013 of $1.40. The 5 year low, median and high median P/AFFO Ratios are 12.23, 14.15 and 16.54. Since the current P/AFFO Ratio is higher than the 5 year median high P/AFFO Ratios, it suggests that the stock price is on the high side.

While from all this I can say that the stock price is definitely not cheap. It would seem to be on the high side, but it is not unreasonably high. I recently bought some RioCan at a similar price. However, I sold a stock to buy the RioCan stocks, so relatively speaking I sold a stock at a high price and bought RioCan at a relatively high price.

When I look at analysts' recommendations, I find just Buy and Hold recommendations. Most of the recommendations are a Hold, so the consensus recommendation would be a Hold. The 12 month stock price consensus is $30.00. This implies 12 months total return of 13.97%, with 5.12% from dividends and 8.85% from capital gains.

There is a Financial Post article about RioCan REIT trimming its Canadian portfolio.

An analyst that thinks this stock is a buy quoted the good dividend yield of $5.2% and that fact that this company has been successful in expanding into the US. Others think that it is a high quality REIT and that it will benefit when Target moves into Canada. See an articles in Globe & Mail and Financial Post that talks about RioCan and Target stores.

The Dividend Girl has recently invested in this stock for her TFSA. Finally, the Jags Report talks about recently rating changes by CIBC and Scotia Bank on this stock. There is also some discussion on this stock at Canadian Money Form.

Personally I think that this is a good company and a well-run REIT. However, at the moment, I think that the stock price is reasonable (but on the high side) to a bit too pricey. However, if you look at the seasonality of this stock, March and April are not great months for capital appreciation, the summer is good and price seems to drop-off in October. See chart at Equity Clock site.

RioCan is Canada's largest real estate investment trust. It owns and manages Canada's largest portfolio of shopping centers. RioCan owns an 80% interest in 31 grocery anchored and new format retail centers in the United States through various joint venture arrangements. In addition, RioCan owns a 14% equity interest in Cedar Shopping Centers, Inc., a real estate investment trust focused on supermarket-anchored shopping centers and drug store-anchored convenience centers located predominantly in the Northeastern United States. Its web site is here RioCan. See my spreadsheet at rei.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.