I own this stock of Choice Properties REIT (TSX- CHP.UN, OTC-PPRQF). I got this stock when CDN REIT was acquired by Choice Properties.
When I was updating my spreadsheet, I noticed this REIT has only been around for 4 years and it has grown quite a bit in that time period. For example, Revenue is up by 27% and EPS by 52%.
The dividend yield has been good to high. The current dividend yield is good at 5.97% and the 4 year median is also good at 5.36%.
The only item with little growth is the dividends or distributions. The growth over the past 5 years is at 2.86% per year. However, dividend increase did not happen at first with the first increase in 2016 and another one in 2017. So far there has been no increase this year. There is a trade off between dividend yield and dividend growth with higher yields come low growth.
By the standard of earnings, they cannot afford their dividends because 4 year coverage is at 393%. The 2017 coverage is better at 74% with coverage expected to be around 52% in 2018. Generally, affordability on dividends or distributions for REITs is measured using Funds from Operations (FFO) or Adjusted Funds from Operations (AFFO). The DPR for AFFO for 2018 is 83% with 5 year coverage at 84%. The DPR for FFO for 2018 is 68% with 5 year coverage at 68%. Coverage is expected to be between 75% and 95% on this measurement.
Debt/Market Cap Ratio is fine at 0.60 in 2017 and the current one at 0.71. The Liquidity Ratio is really low. Unfortunately, this is the case for all REITs. The current Liquidity Ratio is just 0.32. Which means that the current assets cannot cover the current liabilities. Even when you take of current portion of the debt and add in Cash Flow after Dividends, the ratio is still below 1.00 at 0.79. Liquidity is a problem as it is companies with low Liquidity Ratios that have hard times in recessions.
Unfortunately, the Debt Ratio is also low at 1.10. Most REIT have good Debt Ratios but this company does not. Also, the Leverage and Debt/Equity Ratios are really high at 10.69 and 9.68 but it has been reduced to 4.80 and 3.80 for the second quarter of 2018 and I suspect it will be more reasonable in the future.
The Total Return per year is shown below for year 4. 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. Total return has been good for shareholders.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 4 | 2.86% | 12.04% | 6.14% | 5.90% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 13.12, 13.85 and 14.58. We only have 5 year ratios to go on. The current P/E Ratio is 8.61 based on a stock price of $12.39 and last 12 month EPS of $1.14. This stock price testing suggests that the stock price is relatively cheap.
Generally, the Price/Funds from Operations (FFO) Ratio test is considered a better test for REITs than the P/E Ratio test. The 5 year low, median, and high median P/FFO Ratios are 11.26, 12.67 and 13.34. The current P/FFO Ratio is 12.03 based on 2018 FFO estimate of 1.03. This stock price testing suggests that the stock price is reasonable and below the median.
I get a Graham Price of $16.45. The 5 year low, median, and high median Price/Graham Price Ratios are 0.84, 0.88 and 0.93. The current P/GP Ratio is 0.75 based on a stock price of $12.39. This stock price testing suggests that the stock price is relatively cheap.
I get a 5 year median Price/Book Value per Share Ratio of 1.21. The current P/B Ratio is 1.06 based on Book Value of $3,236.M, Book Value per Share of $11.67 and a stock price of $12.39. The current P/B Ratio is some 12% less than the 10 year ratio. This stock price testing suggests that the stock price is reasonable and below the median.
I get an historical median dividend yield of an historical dividend yield of 5.36%. The current dividend yield is 5.97% based on dividends of $0.74 and a stock price of $12.39. The current yield is some 11% above the historical one. This stock price testing suggests that the stock price is reasonable and below the median.
The 5 year median Price/Sales (Revenue) Ratio is 6.77. The current P/S ratio is 7.08 based on 2018 Revenue estimate of $1,167M, Revenue per Share of $1.73 and a stock price of $12.39. The current ratio is some 4.7% above the 5 year median ratio. This stock price testing suggests that the stock price is reasonable but above the median.
When I look at analysts’ recommendations I find Strong Buy (1) and Hold (7). The consensus would be a Hold. The 12 month stock price is $13.14. This implies a total return of $12.03% with 6.05% from Capital Gains and 5.97%% come Distributions based on a current stock price of $12.39
Demetris Afxentiou on Motley Fool thinks this REIT is a good one for your portfolio. John Lawlor on Seeking Alphaalso has good things to say about this REIT. Rachelle Younglai And Marina Strauss on G&M talk about Choice takeover of CDN REIT. See what analysts are saying about this stock on Stock Chase. Analysts say some interesting things.
Choice Properties Real Estate Investment Trust is a player in the real estate sector. The company functions as a real estate investment trust which primarily is focused on managing supermarkets. Its web site is here Choice Properties REIT.
The last stock I wrote about was about was Loblaw Companies Ltd. (TSX-L, OTC-LBLCF) ... learn more. The next stock I will write about will Newfoundland Capital Corp. (TSX-NCC.A, OTC-none) ... learn more on Friday, August 10, 2018 around 5 pm. Tomorrow on my other blog I will write about Something to Buy August 2018.... learn more on August 9, 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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