I do not own this stock of SmartCentres 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. Between 2009 and now it was taken from the list and added back to this list. From 2009 and 2013 it had no increases in dividends.
When I was updating my spreadsheet, I noticed I had a hard time hunting for the figures I needed to update my spreadsheet. I hate when the company makes it difficult to find things in the financial statements.
This is a REIT, so you would expect it to have good dividend yield (5% and over). The dividend yield is 5.69%. The 5, 10 and historical dividend yields are 5.43%, 5.75% and 5.88%. The other thing with REIT is that the dividend growth tends to be low (under 8%). Hopefully, the dividends will grow faster than inflation. That is generally the best to be expected from a REIT.
The Dividend Payout Ratios are fine. It is interesting that this REIT has reasonable DPR for EPS which for 2018 was 85% with 5 year coverage at 76%. For REITs you generally want to look at the DPR in connection with Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO). The DPR for FFO for 2018 is 77% with 5 year coverage also at 77%. The DPR for AFFO for 2018 is 82% with 5 year coverage also at 82%.
Debt Ratios are currently fine. The concern for this REITs is that in a recession they may not be able to cover current portion of the long term debt. The Long Term Debt/Market Cap Ratio is good at 0.72 for 2018. The Long Term Debt/Assets Ratio is also good at 0.40 for 2018. Assets/Current Liabilities Ratio is also good at 11.87 for 2018. The first two ratios you want to be below 1.00 and the third and last ratio, higher is better.
The Liquidity Ratio for 2018 is really low at 0.18. This means that current assets cannot cover current liabilities. To get to a decent ratio you have to add in cash flow after dividends and current portion of the long term debt and then you get to 1.46. I would prefer this final ratio to be at 1.50 or higher. The current Liquidity Ratio is 0.44 and with cash flow and current portion of long term debt it is 2.27.
The Debt Ratio is good at 2.13 for 2018 with a current one at 2.20. Leverage and Debt/Equity Ratios for 2018 is 1.89 and 0.89 with current ratios at 1.83 and 0.83. These are good ratios.
The Total Return per year is shown below for years of 5 to 21 to the end of 2018. 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 chart below.
As with most REITs, a high portion of the total return is from dividends.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 2.58% | 10.23% | 4.15% | 6.08% |
| 2008 | 10 | 1.28% | 20.36% | 10.51% | 9.85% |
| 2003 | 15 | 2.87% | 13.69% | 5.53% | 8.16% |
| 1998 | 20 | 14.20% | 7.31% | 6.89% | |
| 1997 | 21 | 27.69% | 14.85% | 12.85% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.84, 13.95 and 15.05. The corresponding 10 year ratios are 12.92, 13.98 and 15.29. The corresponding historical ratios are 9.41, 16.43. and 20.65. The current P/E Ratio is 15.29 based on a stock price of $31.65 and 2019 EPS estimate of $1.80. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Because this is a REIT, we need also to look at P/FFO Ratios. The 5 year low, median, and high median Price/FFO per Share Ratios are 13.01, 14.28 and 15.33. The corresponding 10 year ratios are 13.12, 14.51 and 15.77. The current P/FFO Ratio is 13.89 based on a stock price of $31.65 and 2019 FFO estimate of $2.28. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $35.01. The 10 year low, median, and high median Price/Graham Price Ratios are 0.81, 0.83 and 0.95. The current P/GP Ratio is 0.90 based on a stock price of $31.65. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $36.74 using the FFO in the formula. 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 $31.65. 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 1.23. The current P/B Ratio is 1.20 based on a Book Value of $4,421M, Book Value per Share of $26.31 and a stock price of $31.65. The current ratio is 2.5% below the 10 year median 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 5.88%. The current dividend yield is 5.69% based on dividends of $1.80 and a stock price of $31.65. The current yield is 3.3% 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 6.25. The current P/S Ratio is 6.72 based on 2019 Revenue estimate of $792M and a stock price of $31.65. The current ratio is 7.5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably reasonable. For this stock, the P/S Ratio is a good test as is the dividend yield test. Both say that the stock is reasonable, but above the median. Other good tests of P/FFO Ratio and the P/B Ratio say the stock is reasonable and below the median.
Is it a good company at a reasonable price? For this stock the debt levels are currently fine, but maybe vulnerable with liquidity in bad times as cash flow could drop and it is possible to have problems with debt rollover. A number of analysts feel that they will do fine. You should have at least one REIT in a balance portfolio.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (2) and Hold (5). The consensus would be a Buy. The 12 month stock price consensus is $34.72. This implies a total return of 13.35% with 9.67% from capital gains and 5.69% from dividends.
See what analysts are saying on Stock Chase. Some are negative to growth because of Amazon, but others like it. Nelson Smith on Motley Fool likes this stock and thinks this is a great stock time to buy it. A writer on Simply Wall Street thinks the interest coverage for this stock is a bit low at 2.63x when he prefers 3x coverage. Mike Newton on BNN Bloomberg discusses this stock. Evelyn Kraus on Altcoin Mercury says there has been an 6.9% increase in short sellers of this stock.
SmartCentres Real Estate Investment Trust is a Canadian open-ended mutual fund trust. The company principally generates revenue from property leasing operations. Smart REIT comprises two groups of properties: 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 Monday, September 09, 2019 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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