Friday, March 4, 2016

Canadian Real Estate Investment Trust

Sound bite for Twitter and StockTwits is: Stock is cheap to reasonable. This stock has done well for shareholders with a good dividend yield and higher than inflation dividend growth. See my spreadsheet on Canadian Real Estate Investment Trust.

I own this stock of Canadian Real Estate Investment Trust (TSX-REF.UN, OTC-CRXIF). I started to follow some REITs because I wanted to diversify my portfolio into REITs. I was mainly interested in ones that have commercial properties. 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.

Outstanding shares have grown at 1.8% and 2.5% per year over the past 5 and 10 years. This makes the per share values important. For example, the Revenue has grown at 3.7% and 5% per year over the past 5 and 10 years. However, Revenue per Share has only grown at 1.8% and 2.4% per year over the past 5 and 10 years. Growth per share is important for me as I own shares in this company.

Note that increasing or decreasing outstanding shares is neither good nor bad, but you have to ensure that you look at the right growth rates to determine how well a company is or is not growing. Shares in this company have grown due to Share Issues and DRIP and have decreased due to Buy Backs. For Stock Options, the company buys shares on the open market.

The dividends are good on this stock and the dividend growth is low. The current dividend yield is 4.19% and the 5 and 10 year growth in dividends is 4.9% and 3.4% per year. According to the Bank of Canada inflation over the past 5 and 10 years is at 1.07% and 1.49% per year. Core inflation is running at 1.37% and 1.56% per year.

When you have rather high dividends, and I think any dividend over 4% is high, then you are looking for growth at or above the rate of inflation. This company is certainly increasing dividends faster than the rate of inflation.

The company can afford their dividends. For REITs it is probably best to use Dividend Payout Ratios based on Adjusted Funds from Operations (AFFO) or Funds from Operations (FFO). In 2015 the DPR for AFFO is 73.3% and for FFO is 58%. If you compare the 5 year running average dividends to 5 year running average AFFO or FFO, the DPR for AFFO is 66.9% and for FFO is 57.9%. The company is doing fine as far as DPR goes.

A negative is the very low Liquidity Ratio. The one for 2018 is just 0.28. This means that current assets cannot cover current liabilities. Even adding in Cash Flow after the dividends only raises this ratio to 0.69. This makes the company vulnerability if we hit bad times. The other debt ratios are fine.

Instead of using Price/EPS Ratio, I will be using the P/FFO Ratio to test the stock price. The 5 year low, median and high median Price/FFO Ratios are 13.89, 15.25 and 16.61. The 10 year P/FFO Ratios are similar, if a bit lower at 13.04, 14.36 and 15.97. The current P/FFO Ratio is 13.90 based on a stock price of $42.94 and 2016 FFO estimate of $3.09. This stock price testing suggests that the stock price is reasonable and below the median. It is getting close to cheap.

I get a Graham Price of $56.31. The 10 year low, median and high median P/GP Ratios are 0.91, 1.08 and 1.19. The current P/GP Ratio is 0.76. This stock price testing suggests that the stock price is cheap.

When I look at Dividend Yields, I see that the stock in the past had very high yields. The historical high is around 12%, with a historical median of 6.57% which is some 36% higher than the current one of 4.19. The 5 and 10 year median dividend yields are much lower at 3.79% and 4.28%.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. Most of the recommendations are either a Buy or Hold. The consensus recommendation would be a Buy. The 12 month stock price is $45.58. This implies a total return of 10.34% with 4.19% from dividends and 6.15% from capital gains.

There is a press release on Stock House concerning the 3 and 12 month financial results to the end of December 2015 for this company. Joseph Solitro of Motley Fool likes this REIT. Recent analysts' recommendations and changes are on Financial Market News.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see those reports here and here.

On my other blog I wrote yesterday about Low Dividend Stock... learn more . The next stock I will write about will be Allied Properties Real Estate Investment Trust (TSX-AP.UN, OTC-APYRF)... learn more on Monday, March 7, 2016.

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 Canadian Real Estate Investment Trust.

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.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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