Sound bite for Twitter and StockTwits is: Dividend Growth REIT. The stock price is probably reasonable. It has not been doing well in the short term and dividend growth is low as it is with most REITs. I expect it to do well in the longer term. See my spreadsheet on RioCan Real Estate .
I own this stock of RioCan Real Estate (TSX-REI.UN, OTC-RIOCF). I first bought this stock in 1998 because I wanted to diversify my portfolio into REITs. It was a stock covered and recommended by MPL Communications in their Income Trust coverage. Over the years I have made several more purchases of this REIT.
When I was updating my spreadsheet, I noticed I have done well with this stock overall with a total return of 11.43% per year and 2.57% from capital gains and 8.86% from dividends. However, shareholders over the past 5 years have not done that well with total return at 5.60% and 0.23% from capital gains and 5.35% from dividends.
The dividend yields are good with dividend growth low. The dividend yields are good (5% to 6% range). The current dividend yield is 5.60%. The 5, 10 and historical median dividend yields are 5.57%, 5.47% and 7.10%. The dividend growth is low (under 8% per year). See chart below. I have held this stock for 22 years and my dividend growth over that period is 1.95% per year.
The Dividend Payout Ratios are fine. The DPR for EPS for 2019 is 57.14% with 5 year coverage at 77%. Because this is a REIT, the DPR for Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) are important. The DPR for FFO for 2019 is 77%, with 5 year coverage at 78%. The DPR for AFFO for 2019 is 99%, with 5 year coverage at 95%.
The DPR for Free Cash Flow for 2019 is 89% with 5 year coverage at 113%. The Dividend Coverage Ratio for 2019 is 1.12 with 5 year ratio at 0.88. I am using the values from a Morningstar Report. The Wall Street Journal disagrees with these values. (I have found this before when different sources disagree on FCF.)
Debt Ratios are good. Long Term Debt/Market Cap Ratio is good at 0.34. The Liquidity Ratio is good at 3.38, but this is not an important one for REITs. The Debt Ratio is very good at 2.21 with 5 year median also at 2.21. The Leverage and Debt/Equity Ratios are also good at 1.83 and 0.83 with 5 year median also good at 1.86 and 0.86.
The Total Return per year is shown below for years of 5 to 25 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 | 0.42% | 5.60% | 0.25% | 5.35% |
| 2009 | 10 | 0.43% | 9.32% | 3.03% | 6.29% |
| 2004 | 15 | 1.07% | 9.26% | 2.71% | 6.55% |
| 1999 | 20 | 1.64% | 15.94% | 5.81% | 10.13% |
| 1994 | 25 | 4.95% | 21.27% | 7.39% | 13.88% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.82, 11.60 and 12.39. The corresponding 10 year ratios are 10.55, 11.59 and 12.64. The corresponding historical ratios are 11.64, 12.67 and 13.36. The current P/E Ratio is 14.69 based on a stock price of $25.70 and 2020 EPS estimate of $1.75. This stock price testing suggests that the stock price is relatively expensive.
Since this is a REIT, we need to look at Price/Funds from Operations (FFO) Ratios. The 5 year low, median, and high median P/FFO Ratios are 12.64, 13.80 and 15.08. The corresponding 10 year ratios are 13.35, 14.92 and 16.53. The current P/FFO Ratio is 14.77 based on a stock price of $25.70 and 2020 FFO of $1.74. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Since this is a REIT, we also need to look at Price/Adjusted Funds from Operations (AFFO) Ratios. The 5 year low, median, and high median P/AFFO Ratios are 15.90, 17.14 and 19.03. The corresponding 10 year ratios are 16.05, 17.51 and 19.10. The current P/FFO Ratio is 17.25 based on a stock price of $25.70 and 2020 AFFO of $1.49. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $29.34. The 10 year low, median, and high median Price/Graham Price Ratios are 0.85, 0.92 and 1.04. The current P/GP Ratio is 0.88 based on a stock price of $25.70. 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 1.26. The current P/B Ratio is 1.00 based on a Book Value of $8,160M, Book Value per Share of $25.69 and a stock price of $25.70. The current P/B Ratio is 21% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 7.10%. The current dividend yield is 5.60% based on dividends of $1.44 and a stock price of $25.70. The current dividends are 21% below the historical dividend yields. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 5.47%. The current dividend yield is 5.60% based on dividends of $1.44 and a stock price of $25.70. The current dividends are 2.44% above the 10 year median dividend yields. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 7.14. The current P/S Ratio is 7.17 based on 2020 Revenue estimate of $1,138M, Revenue per Share of $3.58 and a stock price of $25.70. The current ratio is 0.5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.
Results of stock price testing is that the stock price is probably reasonable and at the median. The best test is the P/S Ratio one. However, the P/FFO and P/AFFO are also good tests and show the price reasonable and below the median. I wonder about the P/E Ratio test as analysts have been under estimating the EPS recently. The problem with the dividend yield test is the flatness of the dividends. There is no problems with the P/B Ratio test, The P/GP Ratio test, the P/FFO Ratio test nor the P/AFFO Ratio test.
Is it a good company at a reasonable price? I have had this stock for some 22 year and do not plan to sell. If you hold companies for the long term there are bound to both good and bad times. I expect that the stock will pick up again, although I must admit that it has not done that well in the current short term. I still expect it will do well in the longer term.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (4) and Hold (2). The consensus would be a Buy. The 12 month stock price consensus is $29.47. This implies a total return of 20.27% with 5.60% from dividends and 14.67% from capital gains based on a current stock price of $25.70.
See what analysts are saying on Stock Chase. There are mixed feelings, but mostly it is liked. Nelson Smith on Motley Fool thinks now is the time to buy this stock. A writer on Simply Wall Street is worried about this company’s debt. A writer on Simply Wall Street says that they will give this dividend stock a miss for right now. Duffie Osental on Mortgage Brokers News talks about this company launching Green Bonds.
RioCan Real Estate Investment Trust is a Canadian real estate investment trust which owns, develops, and operates Canada's portfolio of retail-focused, increasingly mixed-use properties. The REIT's property portfolio includes shopping centers and mixed-use developments, with most of its properties located in Ontario, Canada. Its web site is here RioCan Real Estate.
The last stock I wrote about was about was Home Capital Group (TSX-HCG, OTC-HMCBF) ... learn more. The next stock I will write about will be Allied Properties Real Estate Investment Trust (TSX-AP.UN, OTC-APYRF) ... learn more on Monday, March 9, 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.
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.
No comments:
Post a Comment