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.
When I was updating my spreadsheet, I noticed that the Liquidity Ratio is very low. For 2017 it is 0.21. If this ratio is not 1.00 or above, it means that current assets cannot cover current liabilities. It only gets to be a good ratio 1.85 when you exclude from current liabilities their current debt. They are having no trouble currently rollover their debt, but things can change in a recession. This is a vulnerability.
There has been really no growth in dividends. There was a 40% increase in the second year of dividends which was 2006. In 2008 and 2009 there were increases that were less than 2% and then nothing. On the other hand, the dividends or distributions yield is high. The current yield is 8.27%. The 5, 10 and historical median distribution yields are 7.82%, 8.28% and 7.82%.
Since this is a Real Estate Investment Trust you generally look at Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) to decide if the company can afford their distributions. The FFO Dividend Payout Ratio is good with the one for 2017 at 75.5% and 5 year coverage at 74.0%.
Their long term debt is increasing. The Long Term Debt/Market Cap Ratio for 2017 was 0.56 but Long Term Debt has gone up since then another 32% and currently this ratio is 0.76. The ratio is still fine but it is climbing. I discussed my concerns with their Liquidity Ratios above. Their Debt Ratio at 2.00 and 5 year median at 1.97 are good ratios. For a utility the Leverage and Debt/Equity Ratios are good at 2.00 and 1.00 for 2017 and 5 year median at 2.14 and 1.14.
The Total Return per year is show below for years of 5 to 13. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
For those who bought this stock at the beginning, they have done well. However, lately the total returns are low.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 0.00% | 5.13% | -2.05% | 7.18% |
| 10 | 0.28% | 6.69% | -0.66% | 7.35% |
| 13 | 3.13% | 18.92% | 6.59% | 12.33% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.40, 11.35 and 12.30. The 10 year corresponding ratios are 3.85, 4.30 and 4.75. The historical ratios are -2.01, -3.10 and -3.59. the problem is that the company has had so many years of earnings losses. The current P/E Ratio is 10.53 based on a stock price of $13.06 and 2018 EPS estimate of $1.24. This stock price testing suggests that the stock price is relatively reasonable and below the median.
For REITs Price/FFO Ratio test is probably a better one. The 5 year low, median, and high median P/FFO Ratios are 8.48, 9.27 and 10.59. The 10 year corresponding Ratios are 8.73, 9.80 and 11.06. The current P/FFO Ratio is 9.47 based on a stock price of $13.06 and 2018 FFO estimate of $1.38. This stock price testing suggests that the stock price is relatively reasonable and around the median.
I get a Graham Price of $20.81. The 10 year low, median, and high median Price/Graham Price Ratios are 0.61, 0.69 and 0.76. The current P/GP Ratio is 0.63 based on a stock price of $13.06. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share of 0.89. The current P/B Ratio is 0.84 based on Book Value of $2,386M, Book Value per Share of $15.52 and a stock price of $13.06. The current P/B Ratio is some 5% below the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 8.27%. The historical median dividend yield is 7.82% based on dividends of $1.08 and a stock price of $13.06. The current yield is some 5.8% above the historical median. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 3.77. The current P/S Ratio is 3.84 based on Revenue estimate for 2018 of $523M, Revenue per Share of $3.40 and a stock price of $13.06. The current P/S Ratio is some 1.9% above the 10 year median. This stock price testing suggests that the stock price is relatively reasonable but a bit above the median.
When I look at analysts’ recommendations I find Buy (1), Hold (9) and Underperform (1). The consensus would be a Hold recommendation. The 12 month stock price consensus is $13.88. This implies a total return of 14.55% with 8.28% from capital gains and 8.27% from distributions.
Haris Anwar of Motley Fool thinks Artis REIT is a high yielding and low risk REIT. Jacqueline McKee on Hillary HQ talks about a big fall in short selling interest for this company. See what analysts are saying about this stock on Stock Chase. Analysts talk about its heavy exposure to Alberta and about the fact that they are increasing their US exposure.
Artis Real Estate Investment Trust is a closed-end REIT based in Canada. The company's portfolio comprises of properties primarily divided into office retail and industrial in Central and Western Canada and select markets throughout 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 Friday, July 20, 2018 around 5 pm. Tomorrow on my other blog I will write about Another Source of Income 3.... learn more on Thursday, July 19, 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.
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