SmartCentres REIT

Sound bite for Twitter and StockTwits is: Dividend Growth REIT. Most of the test show the stock price is reasonable. There is a complex ownership structure and the chairman has special voting units. See my spreadsheet on SmartCentres REIT.

I do not own this stock of Smart REIT (TSX-SRU.UN, OTC-CWYUF). Once you have 5 or 6 stocks, you might want to consider a REIT for diversification. REITs are an easy way to investment in real estate. I am therefore following a few REIT stocks and in 2009 I decided to look at a few on the Dividend Achiever's List. Unfortunately, this stock is no longer on the Dividend Achiever's List.

When I was updating my spreadsheet, I noticed it has a complex ownership structure and the chairman still has Limited Partnership Shares and Special Voting Shares. Because it is a REIT, analysts look at Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO). They decided to change the AFFO to ACFO (which is Adjusted Cash Flow from Operations). This does nothing to help in analyzing a company.

Dividend yields are in the good category at 4% and above. The current dividend is 5.61% with the 5, 10 and historical median dividend yields at 5.43%, 5.81% and 5.90%. Dividend increases are low and over the past 5 and 10 years under 2% per year. This is because there were no dividend increases from 2009 to 2013 inclusive. The last dividend increase was for 2.9% and it occurred in 2017.

The Dividend Payout Ratio (DPR) for EPS is fine and in 2017 it was 76% with 5 year coverage at 73%. Because this is a REIT, it is normal to look at DPR using Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO). The DPR for FFO for 2017 is 76% and the 5 year coverage is 78%. The DPR for AFFO for 2017 is 82% and the 5 year coverage is 83%. The good range for DPR coverage by FFO and AFFO is 75% to 95%.

The Liquidity Ratio is low as it is for most REITs. The ratio for 2017 is 0.41. This means that the current assets cannot cover current liabilities. However, if you add back in Long Term Debt (LTD) due currently and add in cash flow after distributions, the ratio is 1.64. The Debt Ratio is 2.06. Leverage and Debt/Equity Ratios are 1.94 and 0.94. So, we are fine here.

The Total Return per year is show below for years of 5 to 20. 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.

The long term Total Return is high because it seems that the first shares were sold cheaply and it was a Limited Partnership at that time. It because an REIT in March 2002

Years	Div. Gth	Tot Ret	Cap Gain	Div.
5	1.99%	6.75%	1.32%	5.43%
10	1.18%	8.21%	2.36%	5.86%
15	2.86%	18.09%	8.03%	10.06%
20		27.98%	15.66%	12.32%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.59, 13.65 and 15.05. The corresponding 10 year ratios are 12.72, 13.98 and 15.29. The corresponding historical ratios are 12.99, 16.85 and 22.86. The current P/E Ratio is 13.07 based on last 12 months EPS of $2.39 and a stock price of $31.21. This stock price testing suggests that the stock price is relatively reasonable and below the median.

Because this is a REIT, we should also look at P/FFO Ratios. The 5 year low, median, and high median Price/FFO per Share Ratios are 12.96, 14.28 and 15.33. The corresponding 10 year ratios are 12.98, 14.47 and 15.69. The current P/FFO Ratio is 13.81 based on a stock price of $31.21 and 2018 FFO estimate of $2.26. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a Graham Price of $36.25. The 10 year low, median, and high median Price/Graham Price Ratios are 0.82, 0.89 and 0.96. The current P/GP Ratio is 0.86 based on a stock price of $31.21. 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 Ratio of 1.25. The current P/B Ratio is 1.21 based on a stock price of $31.21, Book Value of $4,075M and Book Value per Share of $25.84. The current ratio is some 3.12% 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 5.90%. The current dividend yield is 5.61% based on distributions of $1.75 and a stock price of $31.21. The current yield is some 5% below the historical yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.

The 10 year median Price/Sales (Revenue) Ratio is 6.13. The current P/S Ratio is 6.18 based on 2018 Revenue of $796M, Revenue per Share of $5.05 and a stock price of $31.21. The current ratio is 0.9% above the 10 year median. This stock price testing suggests that the stock price is relatively reasonable and at the median.

When I look at analysts’ recommendations I find Strong Buy (1), Buy (3) and Hold (4). The consensus recommendations would be a Buy. The 12 month consensus stock price is $33.00. This implies a total return of 11.34% with 5.74% from capital gain and 5.61% from dividends.

Joey Frenette of Motley Fool thinks you should buy this stock because its malls are anchored by Walmart. Gary James on Marea Informative talks about what analysts are recently saying about this stock. Chris Amalia on Simply Wall Street talks about the uses of the FFO metric. See what analysts are saying on Stock Chase. There are quite mixed views about this REIT or any REIT.

SmartCentres Real Estate Investment Trust develops, leases, constructs, owns and manages shopping centres in Canada. The company comprises two groups of properties are retail and mixed-use. Its web site is here SmartCentres REIT.

The last stock I wrote about was about was High Liner Foods (TSX-HLF, OTC-HLNFF) ... learn more. The next stock I will write about will be Just Energy Group Inc. (TSX-JE, NYSE-JE) ... learn more on Friday, September 14, 2018 around 5 pm. Tomorrow on my other blog I will write about Stock Trading Styles.... learn more on Thursday, September 13, 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.