I do not own this stock of First Capital Realty (TSX-FCR, OTC-FCRGF). In 2011 a reader asked me to review this real estate stock. Also, the site Canadian Dividend Stock site mentions this company as a top Canadian REIT.
When I was updating my spreadsheet, I noticed is that the company has a very low Liquidity Ratio which is 0.54 in 2017 with 5 year median also at 0.54. Adding in cash flow after dividends just gets you to 0.64. You have to add back in the current portion of the long term debt to get a it over 1.00 at 1.24. If you then add the cash flow after dividends the ratio is 1.49. When this ratio is below 1.00, it means that current assets cannot cover current liabilities.
With this Real Estate company cash flow will not cover current liabilities. What you need to do is carefully read the debt section to make sure that the current portion of the long term debt has been taken care. My reading of the financial statements suggests this. However, this is a vulnerability for the company because in bad times they may have trouble dealing with the current portion of long term debt.
Dividends are good, but increases are very low. The current dividend yield is 4.29%, with 5, 10 and historical median yields at 4.61%, 4.61% and 5.20%. Dividend increases have varied a lot over time. They have not declined any year, but they have remained flat some year. Most recently the dividends have been flat since 2016.
Currently the Dividend Payout Ratio for EPS is good. The one for 2017 is 33.7% with 5 year coverage at 61.1%. The DPR for CFPS is a little high at 49% in 2017 with 5 year coverage at 47%. I prefer the DPR for CFPS to be 40% or less. Since this is a Real Estate company, they measure their DPR against Adjusted Cash Flow from Operations (AFFO) and Cash Flow from Operations (FFO). The DPR for AFFO for 2017 is 86% with 5 year average at 85%. The DPR for FFO for 2017 is 74% with 5 year average at 81%
The one I worry about is the Liquidity Ratio. Problem is that a very low one, especially one below 1.00, makes a company vulnerable in bad times. Bad times often hit suddenly. The other debt ratios are not a problem with the Long Term Debt/Market Cap Ratio at 0.77 and the Debt Ratio at 1.89. Leverage and Debt/Equity Ratios are not bad at 2.12 and 1.12 for 2017.
The Total Return per year is shown below for years of 5 to 23 to the end of 2017. 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.
I also looked at the same periods but to the present date. Returns were very similar. This stock has only fall by 3.28% this year.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 0.96% | 6.31% | 1.94% | 4.37% |
| 10 | 0.96% | 8.31% | 3.27% | 5.03% |
| 15 | 1.58% | 14.45% | 6.92% | 7.53% |
| 20 | 2.55% | 7.69% | 2.78% | 4.91% |
| 23 | 7.04% | 13.27% | 5.83% | 7.44% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 16.38, 18.04 and 19.71. The 10 year corresponding ratios are 17.53, 18.97 and 20.41. The historical corresponding ratios are 17.53, 19.76 and 21.68. The current P/E ratio is 16.43 based on a stock price of $20.04 and EPS estimate for 2018 of $1.22. This stock price testing suggests that the stock price is relatively cheap.
Since this is a real estate company it is reporting Funds from Operations, so we should also look at P/FFO. The 5 year low, median, and high median P/FFO are 16.83, 18.46 and 19.82. The corresponding 10 year ratios are 16.03, 17.65 and 18.86. The current P/FFO is 16.29 based on a stock price of $20.04 and FFO estimate for 2018 of 1.23. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of 23.17. The 10 year low, median, and high median Price/Graham Price Ratios 0.90, 0.98 and 1.06. The current P/GP Ratio is 0.87 based on a stock price of $20.04. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 1.18. The current P/B Ratio is 1.03 based on Book Value of $4982M, Book Value per Share of $19.55 and a stock price of $20.04. The current P/B Ratio is some 13% 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 5.20%. The current dividend 4.29% based on dividends of $0.86 with a stock price of $20.04. The current dividend yield is some 17% below the historical median dividend 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 6.06. The current P/S Ratio is 6.93 based on 2018 revenue estimate of $737M, Revenue per Share of $2.89 and a stock price of $20.04. The current ratio is some 14% above the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I think that P/E Ratio looks better because the EPS are increasing more rapidly than the revenue per share. This cannot go on so it will stop at some point. A problem with the EPS is that they do fluctuate a lot. I do not think the P/E Ratio testing is a good test anyways. The stock price would seem to be in the reasonable range, I just do not think it is cheap.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (4) and Hold (2). The consensus would be a Buy. The 12 month stock price estimate is 22.36. This implies a total return of 15.87% with 11.385 from capital gains and 4.29% from dividends.
In this News Wire bulletin, the company says that Chaim Katzman is now a director of the company. An Herdon Staff Writer onHerdon Gazette says that the company has a Piotroski F-Score of 6 which means the balance sheets is relatively strong. Daniel Johnson on Stock Digest says that analysts have assigned a Buy rating on this stock. Will Ashworth of Motley Fool says that this is one of his favourite stock.. See what analysts are saying about this stock on Stock Chase. Analysts seem to like the company.
First Capital Realty Inc is a Canada-based owner, developer, and manager of grocery-anchored urban properties. Historically, revenue contributions have come from supermarkets, drugstores, banks, liquor stores, restaurants, fitness centers, medical and childcare facilities, and other personal services in target markets. Its web site is here First Capital Realty.
The last stock I wrote about was about was DHX Media Ltd (TSX-DHX, OTC-DHXMF) ... learn more. The next stock I will write about will be Stella-Jones Inc. (TSX-SJ, OTC- STLJF) ... learn more on Wednesday, December 12, 2018 around 5 pm. Tomorrow on my other blog I will write about Your Own Enemy when Investing.... learn more on Tuesday, December 11, 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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