First Capital Realty

On my other blog I am today writing about Markets Bulls and Bears...continue...

I do not own this stock of First Capital Realty (TSX-FCR, OTC- FCRGF). In 2011 a reader asked me to review this real estate stock. Also, the site Canadian Dividend Stock site mentions this company as a top Canadian REIT.

This stock used to have a record of raising the dividends, maybe not every year, but the dividend was rising until 2008. The 5 and 10 year growth in dividends was at 2.13 and 4.2% per year when inflation was running around 2%. The 5 and 10 year growth in dividends to date is 1.02% and 1.76%. This is running below or close to inflation which is running at around 1.66% and 1.77% per year over the past 5 and 10 years.

Part of the problem with this stock is that dividends were not raised at all between 2008 and 2011. At the end of 2012 dividend were increased by 5%. However, it would appear that no dividend raise will be made this year as all dividends for 2013 have been declared and paid. I like my investments in Real Estate to run at least at the rate of inflation, which is stock has not lately been able to do.

The Dividend Payout Ratio for EPS is good at 41%. However, the DPR for cash flow is quite high at 93%. It is not good with the DPR for Cash Flow being so high. Also, it shows that the CFPS is higher than EPS. Companies that have CFPS higher than EPS tend not to do so well in the longer term. The situation was the same for 2011 and is expected to be the same for 2013. This is not good.

Even though the stock price is down year to date by some 6.6%, Shareholders have made good total returns on this stock. The total return over the past 5 and 10 years to date is 14.62% and 12.37% per year with 8.18% and 5.87% per year from capital gains and 6.44% and 6.50% per year from dividends.

The outstanding shares have increased by 10% and 21% per year over the past 5 and 10 years. Shares have increased due to Conversion of Debentures to shares, Stock Options and Share Issues. Revenues have increased by 8.8% and 16.4% per year over the past 5 and 10 years. However, Revenue per Share has decreased over these periods by 1% and 3.8% per year. Per share values become much more important when outstanding shares increase so much.

Because the change in accounting rules to the IFRS rules greatly affected the EPS for this stock, you cannot get any reliable growth in earnings. Looking at FFO, growth is at 0% and 1.1.6% per year over the past 5 and 10 years. The growth in AFFO over the past 5 years is also weak at just 0.9% per year.

Cash Flow per Share is down by 2.8% and 6.4% per year over the past 5 and 10 years. However, if you look at the 5 year running averages, the cash flow declines are at 1% and 1.3% per year. This shows that declines are not as bad as they first appeared, but still you would want cash flows to increase, not decrease.

The Return on Equity is at 12% for 2012 as is the ROE on comprehensive income.

The current Liquidity Ratio is just .057. This means that current assets cannot cover the current liabilities. The Liquidity Ratio only rises to 1.28 if you include cash flow after dividends. The Debt Ratio is much better at current value of 1.78. The current Leverage and Debt/Equity Ratios are at 2.29 and 1.29. These are fairly typical for Real Estate companies.

Looking over my spreadsheet, the only good news is in share price growth. Share price growth is unsustainable without growth in other areas. See my spreadsheet at fcr.htm.

This is the first of two parts. Second part will be posted on Tuesday, December 10, 2013 and will be available here.

First Capital Realty is Canada's leading owner, developer and operator of supermarket and drugstore anchored neighbourhood and community shopping centers, located predominantly in growing metropolitan areas. Its web site is here First Capital Realty.

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.