Monday, July 17, 2017

Artis REIT

Sound bite for Twitter and StockTwits is: Dividend Paying REIT. When debt ratios are not up to snuff, a company would be vulnerable in bad times. Stock price seems more reasonable than cheap. See my spreadsheet on Artis REIT.

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.

First, I do not like the debt ratios on this stock. The Long Term Debt/Market Cap Ratio is 1.13. This means that their long term debt is higher than the market value given this stock. Also, the Liquidity Ratio is very low at 0.20. If this is not at least 1.00 it means that the current assets cannot cover the current liabilities. No matter how I fool around with this I cannot get it above 0.76. I am using only cash dividends (compared to dividends due to be paid) and adding back in the current portion of the long term debt.

For companies with a Dividend Reinvestment Plan some of the dividends due to be paid is paid for in new shares. So that actual cash a company has to laid-out is lower than the amount of dividends that is payable. So in calculating a Liquidity Ratio you can use actual dividends paid in cash for the calculation. However, you cannot pretend either that the dividends paid with shares are cost free, they are not. Increase in shares dilute everyone holdings.

The other thing is the increase in outstanding shares. Outstanding shares have increased by 11.1% and 25.7% per year over the past 5 and 10 years. When this happens you do not want to say look at Revenue growth to get an idea of Revenue growth. What you want to look at is Revenue per Share growth. For this stock these are very different.

f Revenue growth over the past 5 and 10 years is at 13.6% and 26.2% per year. Revenue per Share growth is at 2.3% and 0.4% per year over the past 5 and 10 years. Revenue growth looks very good but it really is not. The true growth in Revenue is the Revenue per Share growth.

Dividend yield is very high at 8.19%. I preferred dividend growth companies to companies with high dividend yield. Dividend growth is currently non-existent. Dividends have been flat since 2009. The 5 and 10 year dividend growth is at 0% and 0.3% per year.

Since Price/Earnings Ratios are negative I will use Price/Funds from Operations Ratios. The 5 year P/FFO Ratios are 9.22, 10.38 and 11.52. The 10 year P/FFO Ratios are 9.10, 10.35 and 11.53. The current P/FFO Ratio is 8.97 based on FFO 2017 estimate of $1.47 and stock price of $13.18.. This stock price testing suggests that the stock price is relatively cheap.

I get a Graham Price of $17.77. The 10 year low, median and high median Price/Graham Price Ratios are 0.63, 0.77 and 0.85. The current P/GP Ratio is 0.74 based on a stock price of 13.18. This stock price testing suggests that the stock price is relatively reasonable and below the median.

The 10 year median Price/Book Value per Share Ratio is 0.90. The current P/B Ratio is 0.85 based on BV of $2,323M, BVPS of $15.43 and a stock price of $13.18. The current P/B Ratio is some 4.9% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

The historical median dividend yield is 7.49%. The current dividend yield of 8.19% is based on dividends of $1.08 and a stock price of $13.18. The current dividend is some 9.4% above the historical yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.

When I look at analysts' recommendations, I see Buy and Hold. Most are Hold recommendations and the consensus recommendations would be a Hold. The 12 month stock price is $13.69. This implies a total return of 12.06% with 8.19% from dividends and 3.87% from Capital gains.

Scott Moore on The Cerbat Gem says this stock earned a Hold from 8 analysts' recommendations. Olivia Pulsinelli on Houston Business Journal seems to say that this development by Trammell Crow Co. and Artis REIT took a year to find tenants as it was expected to be completed in June 2016 and they got tenants in June 2017. See what analysts are saying about this stock on Stock Chase. Comments are rather mixed.

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.

The last stock I wrote about was about was TMX Group Ltd (TSX-X, OTC-TMXXF)... learn more. The next stock I will write about will be Atlantic Power Corp (TSX-ATP, NYSE-AT)... learn more on Wednesday, July 19, 2017 around 5 pm. Tomorrow on my other blog I will write about Do Not Panic... learn more on Tuesday, July 18, 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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

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