First Capital Realty

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.

The stock has grown its dividends over the years, but they are inconsistent in their increases and they do not increase the dividend every year. The growth in dividends is at .98% and 1.55% per year over the past 5 and 10 years. The reason that the growth over the past 5 years is low is that there were no increases in dividends between 2009 and 2012.

The last dividend increase is for 2.4% in 2014. If you look at dividend growth over the past 3 years to 2014, the growth in dividends is at 1.84%. For Real Estate stocks you want to dividend growth equal to the rate of inflation. The growth in inflation to 2013 is at 1.61% and 1.75% per year over the past 5 and 10 years. The growth in inflation for the last 3 years to 2014 is 1.56%.

So in the last 3 years the growth in dividends is at the rate of inflation or better. However, the rate of inflation is higher than dividend growth in the past 5 and 10 years. The thing is that a lot of companies have had a hard time with the most recent recession. So for this company to stop increasing dividends is not surprising.

Shareholders have done well over the past 5 and 10 years. The total returns over these periods are at 11.25% and 10.21% per year. The portion of this total return attributable to dividends is at 5.43% and 5.91% per year over these periods. The portion of this total return attributable to capital gains is at 5.82% and 4.31% per year over these periods.

Outstanding shares have increase by 7.7% and 14% per year over the past 5 and 10 years. Shares have increased due to Convertible Debentures, Stock Options and Share Issues. If I were a shareholder per share values would be most important to me because of high rate of increase in shares.

Revenues and Cash Flows have increased very well over the past 5 and 10 years. However, Revenue per Share and Cash Flows per Share growth has been non-existent to mediocre at best. There is a problem in looking at EPS and Net Income because the change in accounting rules in 2011 has had a big effect on these measures.

Revenues have grown at 8.5% and 14.9% per year over the past 5 and 10 years. Revenue per Share is up by 0.8% and 0.8% per year over the past 5 and 10 years. Cash Flow is up by 7.5% and 14.2% per year over the past 5 and 10 years. Cash Flow per Share is down by 0.8% and 3.4% per year over the past 5 and 10 years.

Unfortunately, the growth in Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) has also been non-existent or mediocre. FFO is down by 0.1% and up by 1.8% per year over the past 5 and 10 years. AFFO is up by 1.2% and 1.95 per year over the past 5 and 7 years. AFFO is the newest measure for judging how well REITs are doing, but it has not been used for a long a period at present.

The Liquidity Ratios is really low and even if you add in cash flow after dividends, it is still very low. Liquidity Ratio for 2013 is 0.55 and adding in cash flow after dividends it is 0.65. If this ratio is below 1.00, it means that the current assets cannot cover the current liabilities. It makes a company vulnerable. The other debt ratios are fine.

The 5 year low, median and high median Price/AFFO Ratios are 16.45, 17.77 and 19.09. The current P/AFFO Ratio is 18.52 based on AFFO estimate for 2014 of $0.97 and a stock price of $17.96. This stock price test says that the stock price is relatively reasonable.

I get a 10 year median Price/Book Value per Share Ratio of 1.63. This is based on a BVPS of $16.64 and a stock price of $17.96. The current P/B Ratio 1.08 a value some 34% lower. This stock price test says that the stock price is relatively cheap.

The 5 year median dividend yield is 4.95% a value some 3% higher than the current dividend yield of 4.79% based on a dividend of $0.86 and a stock price of $17.96. This stock price test says that the stock price is relatively reasonable.

The historical dividend yields tell a different story. The historical average dividend yield is 7.03% and the historical median dividend yield is 6.02%. These yields are 51% and 20% higher than the current dividend yields. So on a historical basis, the stock price is relatively expensive.

The analysts' recommendations are Buy and Hold. There are more Hold recommendations than Buy recommendations and the consensus recommendations would be a Hold. The 12 month stock price consensus is $20.40. This implies a total return of 18.37% with 4.79% from dividends and 13.59% from capital gains.

According to Forbes this stock is in oversold territory. This is another way of saying a stock is cheap. The site Markets Wired talks about this company closing a branch in Indiana. There is also a News Wire item talking about a new CEO for 2015.

Sound bit for Twitter and StockTwits is: Dividend growth Real Estate stock, cheap to reasonable price. See my spreadsheet at fcr.htm.

I will have only one entry for this stock as I must do on some stock because I cover too many stocks to do double entries on all that I follow.

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. 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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