Sound bite for Twitter and StockTwits is: Dividend Growth REIT. Dividends did not growth in 2019 and the Debt Ratio are not great. This stock has had good returns for a REIT. See my spreadsheet on Choice Properties REIT.
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. Choice was originally a spin off from Loblaws. Later George Weston Limited (TSX-WN) in a reorganization received Loblaw’s share of choice (61.6% interest) and Loblaws minority shareholders got George Weston Limited shares. The Weston Family own a majority share in George Weston Ltd and George Weston Limited has a controlling interest in Loblaws.
When I was updating my spreadsheet, I noticed I have done quite well with the Choice Buyout of my CDN Real Estate stock. My total return to date is 11.27% per year with 6.21% from capital gains and 5.06% from dividends. Since getting Choice Properties in May of 2018, I have made a total return of 7.99% per year with2.74% from capital gains and 5.25% from dividends
This stock has only been around since 2013. The dividend yields are moderate (2% to 4% range) to good (5% and over). The current dividend yield is 4.97%, with the 5 and 6 year median dividend yields at 5.66%. The dividends are increasing, but at a low rate. See chart below. Note that there was no increase in 2019 and analysts do not expect any more in the short term.
The Dividend Payout Ratios are fine. Since the EPS was negative in 2019, I cannot calculate the DPR for EPS for 2019. The 5 year coverage was 1110%. DPR for CFPS for 2019 is 26% with 5 year coverage at 15%. Adjusted Cash Flow from Operations (AFFO) and Cash Flow from Operations (FFO) are important for REITs. The DPR for AFFO for 2019 is 87% with 5 year coverage at 86%. The DPR for FFO for 2019 is 85% with 5 year coverage at 70%. The DPR for AFFO and FFO are within a normal range.
I will look at the Free Cash Flow. However, Morningstar and Wall Street Journal Disagree on FCF amounts with the WSJ a lot lower. Although, to me, the WSJ ones do not make much sense. The DPR for FCF for 2019 is 67% with 5 year coverage at 69%. Dividend Coverage Ratio for 2019 is 149 with 5 year coverage at 1.46.
Debt Ratios are not what I like to see. The Long Term Debt Market Cap Ratio is 0.66 which is good. The Liquidity Ratio is 0.72 and adding in Cash Flow after dividends just get us to 0.72. This is the first year this company did not state what the current assets and current liabilities were so I had to calculate them. However, the 5 year median Liquidity Ratio with CF after Dividends is 0.84 so this is too low also. This is low amount when compared to other REITs that I follow.
The Debt Ratio is 1.25 with 5 year median 1.10. This is too low. The other REITs that I follow have a better ratio. The Leverage and Debt/Equity Ratios are 5.04 and 4.04. This is also quite high and other REITs I follow have more reasonable ratios.
The Total Return per year is shown below for years of 5 to 6 to the end of 2019. 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.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 2.63% | 11.90% | 5.85% | 6.05% |
| 2013 | 6 | 2.18% | 10.69% | 4.77% | 5.92% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are negative and of no value. The 6 year corresponding ratios are 10.08, 11.08 and 12.08. The corresponding historical ratios are the same and the 6 year ones. The current P/E Ratio is a negative 87.59 based on a stock price of $14.89 and an earnings loss of $0.17. The P/E Ratio for 2021 is 15.04 based on a stock price of $14.89 and 2021 EPS estimate of $0.99. This stock price testing suggests that the stock price is relatively expensive.
This is a REIT, so Adjusted Cash Flow from Operations (AFFO) counts as does P/AFFO Ratios. The 5 year low, median, and high median P/AFFO Ratios are 13.54, 15.32 and 16.27. The corresponding 6 year ratios are 13.79, 15.32 and 16.27. The current P/AFFO Ratio is 16.54. This stock price testing suggests that the stock price is relatively expensive.
This is a REIT, so Cash Flow from Operations (FFO) counts as does P/FFO Ratios. The 5 year low, median, and high median P/AFFO Ratios are 11.23, 12.67 and 13.34. The corresponding 6 year ratios are 11.26, 12.67 and 13.34. The current P/AFFO Ratio is 14.60. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $15.12. The 6 year low, median, and high median Price/Graham Price Ratios are 0.77, 0.88 and 0.93. The current P/GP Ratio is 0.99 based on a stock price $14.89. This stock price testing suggests that the stock price is relatively expensive.
I get a 6 year median Price/Book Value per Share Ratio of 1.21. The current P/B Ratio is 1.50 based on a Book Value of $3,089M, Book Value per Share of $9.96 and a stock price of $14.89. The current P/B Ratio is 23% above the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical and 6 year median dividend yield of 5.66%. The current dividend yield is 4.97% based on dividends of $0.74 and a stock price of $14.89. The current yield is 12% below the historical and 6 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. The P/E Ratio testing is not good as there are negative P/E Ratios.
The 6 year median Price/Sales (Revenue) Ratio is 6.78. The current P/S Ratio is 7.61 based on 2020 Revenue estimate of $1,371M, Revenue per Share of $1.96 and a stock price of $14.89. The current ratio is 12% above the 10 year 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 to expensive. The tests that show this stock is relatively expensive is showing the price not far into the expensive zone. However, the test showing the stock price as reasonable are showing the stock price above the median. So, it is getting expensive.
Is it a good company at a reasonable price? I own this REIT and I will continue to do so but I will keep an eye on it. The balance sheet is leveraged. This can be a problem in an economic downturn. But George Weston Limited has control and deep pockets. It is on the pricey side.
When I look at analysts’ recommendations, I find Strong Buy (1) and Hold (8). The consensus would be a Hold. The 12 month stock price is $15.06. This implies a total return of 6.11% with 1.14% from capital gains and 4.97% from dividends based on a stock price of $14.89.
See what analysts are saying on Stock Chase. One analyst remarked that the balance sheet is more leveraged that he would like. I feel that way too. But they are working to reduce this leverage. Christopher Liew on Motley Fool thinks this is a good defensive stock to own. A writer Simply Wall Street talks about lack of profit, but FFO and AFFO is what is important for REITs.. A writer on Simply Wall Street talks about who owns shares in this company. Manny Gomes on Enterprise Echo talks about what Nation Bank says about this company.
Choice Properties Real Estate Investment Trust invests in, manages, and develops retail and commercial properties across Canada. The company's portfolio primarily consists of shopping centres anchored by supermarkets, and stand-alone supermarkets. The properties are mostly located in Ontario and Quebec, followed by Alberta, Nova Scotia, British Columbia, and New Brunswick. Its web site is here Choice Properties REIT.
The last stock I wrote about was about was Manulife Financial Corp (TSX-MFC, NYSE-MFC) ... learn more. The next stock I will write about will be Russel Metals Inc (TSX-RUS, OTC-RUSMF) ... learn more on Friday, February 21, 2020 around 5 pm. Today on my other blog I will write about Investing in CAE Inc.... learn more on Thursday, February 20, 2020 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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