Monday, October 3, 2016

Granite REIT

Sound bite for Twitter and StockTwits is: Price reasonable and below median. This probably a fair price considering how long we have been into this recovery. The yield is very good and the company has been raising the dividends by around 5% per year lately. This is a good growth considering the high yield. However, I would suspect that there might be some volatility in dividends granted in the future as there was in the past. See my spreadsheet on Granite REIT.

I do not own this stock of Granite REIT (TSX-GRT.UN, NYSE-GRP.U). I first bought some of this stock in 2003 when it was called MI Developments (TSX-MIM.A). It was a company connected with Frank Stronach and Magna. TD bank also had an Action Buy Call (Strong Buy) on this stock. By the December 2006, it was doing well and my stock was up some 15% per year. I bought some more. The year of 2006 was the last time I did well on this stock. It kept going down and I sold it in 2009; being discourage it would ever do well again.

In actual fact if I had held on to this stock, I would have done well. The stock improved after 2009. In 2011 they started to increase the dividends big time. Between 2010 and 2012 the dividends went up almost 300%. The dividend increases slowed after that and they are in the 3% to 5% range. The last increase was in 2016 and it was for 5.7%.

The growth in dividends over the past 5 and 10 years is at 35.8% and 13.9% per year. However, past performance does not translate into future performance. Most of this increase came in one year of 2012 with an increase in dividends of 145%. This was after two years of dividend decreases of 14% and 21% and an increase in dividends of 60%. The company probably increased the dividends in 2011 to coincide with the change from a corporation to a REIT.

Dividends on this stock have gone down as well as up in the past. This is most likely to be what the future holds for this stock. Dividends have been paid for some 14 years including this year. Dividends were decreased in 4 years and increased in the rest of the years. It may be a dividend growth in the long term, but maybe not in the short term.

This company seemed to be hit hard by the 2008 recession, but has been recovering since then. It has been recovering in connection with revenue, earnings (including FFO) and cash flow over the past 5 years. Revenue per Share is up by 4.5% and 2.4% per year over the past 5 and 10 years. FFO is up by 118.6% and 2.1% per year over the past 5 and 10 years.

They do not even give an EPS figure so I will not be doing any P/E Ratio testing. However, I can use FFO in the same manner. The 5 year low, median and high median P/FFO Ratios are 11.12, 12.61 and 13.57. The 10 year values are 10.88, 12.16 and 13.55. The current P/FFO is 11.58 based on FFO estimate of $3.48 for 2016 and a stock price of $40.29. This stock price testing suggests that the stock price is reasonable and below the median.

I get a Graham Price of $55.49 (based on FFO). The 10 year low, median and high median Price/Graham Price Ratios are 0.66, 0.74 and 0.83. The current P/GP Ratio is 0.73 based on a stock price of $40.29. This stock price testing suggests that the stock price is reasonable and below the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.01. The current P/B Ratio is 1.02, a value some 2% high. The current P/B Ratio is based on BVPS of $39.33 and a stock price of $40.29. This stock price testing suggests that the stock price is reasonable and around the median.

The current dividend yield is 6.05%. The historical median dividend yield is 2.80% and the 5 year median is 5.61%. This stock started out with low dividends (1 to 2%) because it was a corporation. The yields went up to the 5 to 6% range when it became a REIT. The current yield is some 7.8% higher than the 5 year yield and this is probably what we should be testing against. On this basis the stock price is reasonable and below the median.

When I look at analysts’ recommendations, I find Buy and Hold recommendations. Most of the recommendations are a Hold and the consensus recommendation would be a Hold. The 12 month stock price consensus is $43.00. This implies a total return of 12.77% with 6.73% from capital gains and 6.05% from dividends based on a current price of $40.29.

John Tilak of Reuters has an article on Yahoo Finance talking about buying Canadian REITs. See what analysts are saying at Stock Chase. Mainly it is rated a Hold because analysts are unsure how new management will work out. Joseph Solitro of Motley Fool likes this REIT because it has been growing its FFO and the yield is over 6%.

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 that report here.

The last stock I wrote about was about was Great-West Lifeco Inc. (TSX-GWO, OTC-GWLIF)... learn more . The next stock I will write about will be Le Chateau Inc. (TSX-CTU.A, OTC-LCUAF)... learn more on Wednesday, October 5, 2016 around 5 pm. Tomorrow on my other blog I will write about Money Show 2016 – James Purvis... learn more on Tuesday, October 4, 2016 around 5 pm.

Granite is a global real estate operating company engaged principally in the acquisition, development, construction, leasing, management and ownership of a predominantly industrial rental portfolio of properties in North America and Europe leased primarily to Magna and its automotive operating units. Members of the Magna International Inc. group of companies are our primary tenants. Its web site is here Granite 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.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.

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