Thursday, September 12, 2013

Granite Real Estate

I do not own this stock Granite Real Estate (TSX-GRT.UN, NYSE-GRP.U), but I used to. I first bought some of this stock in 2003. It is a company connected with Frank Stronach and Magna. TD bank also had an Action Buy Call (Strong Buy) on this stock. By the December 2006, it was doing well and my stock was up some 15% per year. I bought some more. The year of 2006 was the last time I did well on this stock. It kept going down and I sold in 2009; being discourage it would ever do well again.

I look at this stock again to determine what I would have made if I had kept this stock until the current time. My total return per year would have been around 2.97% with 2.54% from dividends and 0.24% from capital gains. I do not regret selling. It would seem, in hind sight, I paid a reasonable price for this stock in 2003, but not in 2006. The stock is not yet back to where it was in 2006.

This stock was hit quite hard in the last recession and is only now recovering. In 2012, they have also changed the currency of both their statements and their distributions. The currency they used to use was US$, but they have changed to the Canadian $. In 2012, the company changed from a corporation to a REIT.

The company cut their dividend in 2010. However, the current dividends are much higher today. The 5 and 10 years growth in dividends is at 27.5% and 17.6% per year. They increased their dividends by 60% in 2011 and then by 150% in 2012. The most recent increase in 2013 is for 5%. In 2013 they have also changed the distribution from a quarterly one to a monthly one.

The Dividend Payout Ratio for 2012 is high for earnings per share at 132%. The DPR for cash flow per share was better at 80%. Analysts expect the DPR for EPS to be much better for this year and around 70%. The current dividend yield is quite good at 5.93%. The dividend increase for 2013 might be an indicator of future increases rather than the history over the last 5 and 10 years.

Revenues hit a high point in 2006. They have declined by almost 80% since then. The revenues are expected to increase in 2013 by around 4%. If you look at the revenues for the last 12 months ending in June 2013 compared to revenues in 2012, they are up by 3.6%. They are going in the right direction.

Earnings per share have been quite volatile and there were losses in 2008, 2009 and 2010. They did start to increase in 2012 and are up for the year ending in June 2013 compared to 2012 by 141%. Cash Flow per Share has also been rather volatile, but they are up over the past 5 years by some 12% per year.

The Return on Equity is rather low in 2012 at just 8.1%. The ROE on comprehensive income is not far behind at 7.1%.

The Liquidity Ratio is low at 1.36. However, REITs do tend to have low Liquidity Ratios. I prefer this ratio to be at 1.50 or higher. The Debt Ratio at 3.57 is very good. Leverage and Debt/Equity Ratios are also good and currently are at 1.32 and 0.32. You want Leverage and Debt/Equity Ratios to be low.

This company has increased the dividend quite a lot recently. However, this was done when it changed to a REIT. I would not expect the past increases to continue. The increase in 2013 was only for 5%. You should also note that REITs tend to increase their dividends just above the rate of inflation. You should probably not expect this company to be any different.

This is another new REIT with a good yield. It is hard to know how well the company will do as a REIT. See my spreadsheet at grt.htm.

This is the first of two parts. Second part will be posted on Friday, September 13, 2013 and will be available here.

Granite is a global real estate operating company engaged principally in the acquisition, development, construction, leasing, management and ownership of a predominantly industrial rental portfolio of properties in North America and Europe leased primarily to Magna and its automotive operating units. Members of the Magna International Inc. group of companies are our primary tenants. Its web site is here Granite Real Estate.

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.

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