Artis REIT

Sound bite for Twitter and StockTwits is: REIT, but not dividend growth. The dividend yield is good at 7.85%, but has not had an increase for a while. See my spreadsheet at ax.htm.

I do not own this stock of Artis REIT (TSX-AX.UN, OTC-ARESF). Early in 2013, this company was mentioned as a good REIT to own. A number of people I correspond with mentioned this REIT. However, my first view of it is not positive. It is also not a dividend growth stock.

One of the first things you see on Artis's Site is the statement of "Artis REIT is focused on producing a stable and growing stream of cash distributions for Unitholders." The problem is that companies that focus on good returns for their shareholders are not the companies that tend to make money and stay around for the long haul. The companies that do stat around are run by people that are passionate about their business.

This company is not producing a growing stream of cash flow. Distributions are up by 0% and 4.2% per year over the past 5 and 10 years. Dividend yield is quite good, but they have not increased the distribution since 2009. The dividend yield is currently at 7.85% and the 5 year median dividend yield is 7.15%.

The Dividend Payout Ratio for EPS has been high for the past 2 years and is expected to be even higher in 2015. However, the DPR for AFFO and FFO seems fine. The DPR for EPS for 2013 and 2014 was 95% and 81%. This ratio is expected to be 113% in 2015. The corresponding DPR for AFFP and FFO for 2014 was 87.8% and 76%. The Ratios for 2015 are expected to be 83% and 71%, respectively.

If you had held this stock for the past 5 and 10 years, dividends would have covered 43.6% and 94.7% of the cost of your stock if you paid a median price. If you had held this stock for the past 5 and 10 years, your dividend yield would be 8.72% and 9.54% if you paid a median price.

Shares have increased by 29% and 62% per year over the past 5 and 10 years. Shares have increased due to Stock Issues, Conversion of Debentures, Stock Options and DRIP. This makes the per share values the most important ones. Revenue growth is low to good. EPS growth is good, but this is because of a lot of years of negative EPS. Cash Flow growth is moderate to good. FFO growth is non-existent to good and AFFO growth is moderate.

Revenue has grown at 29.6% and 97.6% per year over the past 5 and 10 years. Revenue per Share has only grown at 0.1% and 21.8% for the past 5 and 10 years. Analysts expect Revenue growth to be around 6.5% in 2015. If you compare the 12 month period to the end of 2014 and the 12 month period to the end of the first quarter, Revenue has grown at only 1.7%.

As I have said, EPS growth is very good, but 5 and 10 years ago, this stock had negative earnings. They did not start to have positive earnings until 2011. EPS growth is 47.3% and 20.5% per year over the past 5 and 10 years. Analysts expect EPS to drop by some 29% in 2015. If you compare the 12 month period to the end of 2014 and the 12 month period to the end of the first quarter, EPS is down 26%. EPS is expected to do better in 2016.

Cash flow is up by 38% and 37.6% per year over the past 5 and 10 years. CFPS is up by 6.7% and 28% per year over the past 5 and 10 years. Analysts expect cash flow to drop by around 43% in 2015. If you compare the 12 month period to the end of 2014 and the 12 month period to the end of the first quarter, cash flow is up by 8.2%.

Funds from Operations (FFO) is down by 15.5% per year over the past 5 years and up by 10.3% per year over the past 9 years. Analysts expect FFO to grow by 7% in 2015. If you compare the 12 month period to the end of 2014 and the 12 month period to the end of the first quarter, FFO is flat.

Adjusted Funds from Operations (AFFO) is up by 5.5% per year over the past4 years. Analysts expect AFFO to growth by 5.7% in 2015. If you compare the 12 month period to the end of 2014 and the 12 month period to the end of the first quarter, AFFO has grown by 0.8%.

The Return on Equity is low. The ROE for 2014 was 7.3% and the 5 year median ROE is 7.7%. The ROE on comprehensive income is better at 9.7% with a 5 year median value of 9.7%.

I hate the Liquidity Ratio. Low Liquidity Ratios make a company vulnerable in the bad times. If you invest in a company for the longer term you want it able to survive the bad times. If you look at current assets and current liabilities, the 2014 Ratio is 0.15. This means that the company has far more liabilities and assets. You have to subtract the current portion of long term debt and add in cash flow after taking into account actual cash dividends paid. The Ratio is then low, but acceptable at 1.40.

This company does not pay all dividends in cash. Because it has a DRIP plan they can issue dividends as stock not cash and this conserves their cash.

Other debt ratios are fine. The Debt Ratio for 2014 is 1.99 and the Leverage and Debt/Equity Ratios for 2014 are 2.01 and 1.01.

This is the first of two parts. The second part will be posted on Friday, July 24, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Artis REIT's portfolio is comprised of industrial, retail, and office space in Canada and the United States. Its web site is here Artis 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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