Allied Properties Real Estate Investment Trust

Sound bite for Twitter and StockTwits is: Buy for Diversification. The reason to buy REITs is to diversify your portfolio. This REIT seems to be priced reasonably. See my spreadsheet on Allied Properties Real Estate Investment Trust.

I do not own this stock of Allied Properties Real Estate Investment Trust (TSX-AP.UN, OTC-APYRF). Since several stocks that I followed last year were deleted from the stock exchange, I was looking for other stocks to follow. I am sure that I got this from a Canadian Dividend site called Think Dividends, but I cannot find it at present.

On this REIT, the dividend yield is good. The current dividend yield is 4.29%. The 5 year median dividend yield is 4.34%. The 10 year 5.19%. The historical dividend yield is not as high as the last two REITs I reviewed because this REIT only went public in 2003. They did have much higher dividend yields at first as did other REITs.

The dividend growth is above the rate of inflation. The dividends have grown at 3% and 2.4% per year over the past 5 and 10 years. The inflation rate for the past 5 and 10 years is at 1.33% and 1.46% per year. For REITs you would expect good dividend yields and dividend growth at or over the rate of inflation. They do not raise the distributions every year, but they do growth them.

The Dividend Payout Ratios are fine. Generally for REITs you look at Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) to judge the Dividend Payout Ratios. The DPR for FFO for 2015 is 71.2% and the 5 year rate is 70.6%. The DPR for AFFO for 2015 is 87% and the 5 year rate is 84%.

What I do not like about the REITs I have so far reviewed is the lack of a viable Liquidity Ratio. No matter how I look at it I cannot get the one for this company to 1.00. I have added back in this year's portion of the long term debt and Cash Flow after dividends and still only get to 0.81. If the value is below 1.00 means that current assets cannot cover current liabilities. This can be a real problem in economic downturns. Other debt ratios are fine.

Generally for REITs, I like to look at Price/FFO Ratios rather than Price/Earnings per Share Ratios. The 5 year low, median and high median P/FFO Ratios are 14.24, 16.62 and18.22. The corresponding 10 year values are 13.92, 16.08 and 18.13. The current P/FFO Ratio is 16.06 based on FFO estimate for 2017 of $2.22 and a stock price of $35.65. This stock price testing suggests that the stock price is reasonable and around the median.

I get a Graham Price of $42.20. The 10 year low, median and high median Price/Graham Price Ratios are 0.79, 0.89 and 0.99. The current P/GP Ratio is 0.84 based on a stock price of $35.65. This stock price testing suggests that the stock price is reasonable and below the median.

I get a 5 year Price/Book Value per Share of 1.08. I am using the 5 year value as the change to the new accounting rules affected BV for REITs. The current P/B Ratio is 1.00 a value some 7% lower. This current P/B Ratio is based on a stock price of $35.65 and a Book Value per Share of $35.65. This stock price testing suggests that the stock price is reasonable and below the median.

For this REIT, I will do the Dividend Yield testing using the 5 year median dividend yield. The 5 year median dividend yield is at 4.34% a value some 1.2% higher than the current dividend yield. The current dividend yield of 4.29% is based on distributions of $1.53 and a stock price of $35.65. This stock price testing suggests that the stock price is relatively reasonable and around the median.

When I look at analysts' recommendation, I find Buy and Hold recommendations. Most of the recommendations are a Buy and the consensus recommendation is a Buy. The 12 month stock price is $38.35. This implies a total return of 11.87% with 4.29% from dividends and 7.57% from capital gains based on a current stock price of $35.65.

Lucas Kauffman on Chaffey Breeze talks about TD Securities recently reducing their target price from $40.00 to $39.00. CIBC also lowered their target price. Kay Ng of Motley Fool likes this REIT. See what Analysts are saying about this stock on Stock Chase. Not many follow it, but the ones that do make positive comments.

Allied Properties REIT owns a portfolio of predominantly Class I office properties in Toronto, Montreal, Winnipeg, Quebec City, Ottawa, Victoria, Calgary, Edmonton, Vancouver, and Kitchener-Waterloo. Its web site is here Allied Properties Real Estate Investment Trust.

The last stock I wrote about was about was RioCan Real Estate (TSX-REI.UN, OTC- RIOCF)... learn more . The next stock I will write about will be H & R Real Estate Trust (TSX-HR.UN, OTC-HRUFF)... learn more on Monday, March 6, 2017 around 5 pm.

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.