Friday, March 2, 2018

RioCan Real Estate

Sound bite for Twitter and StockTwits is: Canadian REIT. There is insider buying during the past year whereas others years there was insider selling. This is a good sign. A distribution increase for 2018 is another good sign. Some stock price testing shows this stock as relatively cheap and others at relatively reasonable. It does not appear to be cheap. See my spreadsheet on RioCan Real Estate.

I own this stock of RioCan Real Estate (TSX-REI.UN, OTC-RIOCF). I first bought this stock 1998 because I wanted to diversify my portfolio into REITs. It was a stock covered and recommended by MPL Communications in their Income Trust coverage. Over the years I have made several more purchases of this REIT.

This company has been struggling since 2009. In the three prior years there was net insider selling. This year there is net insider buying. Perhaps this is an indication that insider think that the company is on the right track.

The company states its goal to provide "unitholders stable and reliable cash distributions that will increase over the long term". Analysts now think that the company will do modest rises to the distribution in 2018 and 2019. And, this REIT has increased the dividends for 2018 by2.1%. This is the first increase since 2013.

Dividends have grown by 0.43%, 0.60%, 1.64%, 3.04 and 5.30% per year over the past 5, 10, 15, 20 and 23 years. However, the last increase was done in 2013. What you should expect from a REIT is growth about or slightly above the rate of inflation.

Distributions on REITs tend to be good. This REIT is no different. The current distribution yield is 6.13% with 5, 10 and historical median yields at 5.35%, 5.47% and 7.47%.

Except for the past 5 years, shareholders have done quite well with this stock. The 5, 10, 15, 20 and 23 year total returns are 2.92%, 7.20%, 12.88%, 13.12% and 21.44% per year. There is a capital loss of 2.44% per year for the past 5 years with capital gains for 10, 15, 20 and 23 years at 1.11%, 4.57%, 4.42% and 7.62% per year. The portion attributed to distributions is 5.36%, 6.10%, 8.31%, 8.70% and 13.82% per year.

I have held this stock for 20 years, but have bought shares in 2000, 2002, 2006, 2010, 2011, 2013 and 2014. My total return is 11.82% with 2.72% from capital gains and 9.20% from distributions. The dividends paid have covered some 76% of the cost of my stock.

The 5 year low, median and high median Price/Earnings per Share Ratios are 10.82, 11.60 and 12.89. The 10 year corresponding ratios are 11.25, 12.06 and 13.12. The historical ratios are 11.64, 12.67 and 13.36. The current P/E Ratio is 13.58 based on current stock price of $23.49 and 2018 EPS estimate of $1.73. This stock price testing suggests that the stock price is relatively expensive.

For REITs it is wise also to look at Price/Funds from Operations Ratios. The low, median and high median 5 year ratios are 13.53, 15.70 and 17.00. The corresponding 10 year ratios are 13.35, 14.92 and 16.77. The current P/FFO Ratio is 13.12 based on a stock price of $23.49 and 2018 FFO estimate of $1.85. This stock price testing suggests that the stock price is relatively cheap.

I get a Graham Price of $30.82. The 10 year low, median and high median Price/Graham Price Ratios are 0.71, 0.77 and 0.84. The current P/GP Ratio is 0.76 based on a stock price of $23.49. 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 1.50. The current P/B Ratio is 0.96 based on Book Value of $7,900M, Book Value per Share of $24.40 and a stock price of $23.49. The current ratio is some 36% below the 10 year median. This would suggest that the stock price is relatively cheap.

However, the book value was affect by the switch to IFRS accounting. The switch to this accounting occurred in 2011. If we look at the median P/B Ratio since then it is 1.14 and the current P/B Ratio is only some 15.6% lower. This suggests that the stock price is reasonable and below the median. Also a P/B Ratio below 1.00 suggests that a stock is cheap.

The historical median yield is 7.47. The current yield is 6.13 based on distributions of $1.44 and a stock price of $23.49. The current yield is some 17.9% higher. This stock price testing suggests that the stock price is relatively reasonable but above the median.

However, the 5 and 10 year yields are a lot lower than the historical yield. The 5 and 10 year yields are at 5.35% (14% lower than the current yield) and 5.47 (12% lower than the current yield). This stock price testing would suggests that the stock price is reasonable and below the median.

The 10 year median Price/Sales (Revenue) Ratio is 7.14. The current P/S Ratio is 6.69 based on 2018 Revenue estimate of $1,137M, Revenue per Share of $3.51 and a stock price of $23.49. The current ratio is 6.4% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

When I look at analysts' recommendations I find Strong Buy (1), Buy (6) and Hold (2) recommendations. The consensus would be a Buy. The 12 month stock price consensus is $27.78. This implies a total return of 24.39% with 18.26% from capital gains and 6.13% from dividends.

In an article on Financial Post Ed Sonshine says he is too busy trying to Amazon-proof his Canadian shopping-mall empire by turning them into hip urban oases to be worried about being number 1. Jacob Donnelly of Motley Fool thinks now is the time to buy RioCan with its 6% distribution. DR Contributor on Danvers Record says a Relative Strength Index of 40.18 shows that this stock is oversold. See what analysts think of this stock on Stock Chase . They have mixed views.

Canadian Real Estate Investment Trust is a real estate investment trust. The Company owns and operates a portfolio of retail, industrial and office properties. Its web site is here RioCan Real Estate .

The last stock I wrote about was about was Atrium Mortgage Investment Corp (TSX-AI, OTC-AMIVF)... 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 5, 2018 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.


  1. Will you continue to hold the stock


    1. This comment has been removed by the author.

    2. I have no current plans to sell.