Canadian Real Estate Trust 2

I own this stock of Canadian Real Estate Investment Trust (TSX-REF.UN, OTC-CRXIF). In September 2009, I wanted to buy another REIT after having to sell Summit. I already have lots of RioCan. I looked at H&R and CDN REIT. I think that CDN REIT is a better buy. I was not interested in CAP as it is only Apartments.

Over the past year there has been insider trading, but only insider buying and very little of that. Insider buying was at $0.4M. The CEO owns shares worth around $19.7M. There is little in the way of options and little in the way of outstanding options. There was no increase in outstanding shares due to options in 2013; however, the company does say that they buy stocks on the open market for stock options.

The 5 year low, median and high median Price/EPS Ratios are high at 33.95, 33.98 and 37.02. The current P/E Ratio is 44.97 based on a stock price of $43.62 and 2014 EPS estimates of $0.97. This stock price test suggests that the stock price is relatively high.

It is probably best to use values for Funds from Operations (FFO) to test the stock price rather than using EPS. The 5 year low, median and high median P/FFO Ratios are 13.14, 14.28 and 15.42. The current P/FFO Ratio is 14.74. This ratio is based on a stock price $43.62 and 2014 FFO estimates of $2.96. This stock price test suggests that the stock price is relatively reasonable, but on the high side. A problem with FFO is that the calculation of this value has changed over time.

I get a Graham price of $23.27. The 10 year low, median and high median Price/Graham Price Ratios are 1.26, 1.56 and 1.76. The current P/GP Ratio is 1.87. This stock price test suggests that the stock price is relatively high.

The 5 year median dividend yield is 4.24%. The current dividend yield is 4.01%, a value some 5% lower. This stock price test suggests that the stock price is reasonable, but on the high side. The historical dividend yield tells a different story. However I calculate an average or a median dividend yield value, it is over 7%. On an historical dividend yield basis, the stock price is quite relatively high.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The 12 month stock price target is $48.30. This implies a total return of $14.74% with 4.01% from dividends and 10.73% from capital gains.

This G&M article talks about how REITs have lost their swagger in 2014. In this Financial Post article, Garry Marr says that REITs could have a strong year in 2014.

I will be keeping my stock in the company, but will not be buying any more. I think that the price is getting too high and I have enough REITs currently. See my spreadsheet at ref.htm.

This is the second of two parts. The first part was posted on Monday, March 03, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

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.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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