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.
When I was updating my spreadsheet, I noticed they have a lot of cash on hand $532M at the end of the second quarter (compared to the end of last year of $55M) because of issuance of debt in the first and second quarters. With this new debt, they paid off $483M of old debt and have the rest sitting as cash.
The dividend yields are good to high with dividend growth low. The current dividend yield is high (above 7%) at 8.83%. The 5, 10 and historical dividend yields are in the good range (5% to 6% ranges) at 5.43%, 5.60% and 5.84%. The dividend growth is low (below 8%). Dividends have increased by 3.04% per year over the past 5 years. The last dividend increase was for 2.8% and it was for 2019.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2019 was 98% with 5 year coverage at 79%. Because this is a REIT, we should look at Adjusted Funds from Operations (AFFO) and Funds from Operations (FFO) Rates. The DPR for AFFO for 2019 was 86% with 5 year coverage at 82%. The DPR for FFO for 2019 was 85% with 5 year coverage at 78%. The DPR for CFPS for 2019 was 63% with 5 year coverage at 66%. The DPR for Free Cash Flow for 2019 was 55% with 5 year coverage at 53%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2019 is 0.78. Because this is a REIT, I look at Debt/Covering Assets Ratio and it is 0.45. The Liquidity Ratio for 2019 is low at 0.54. If you added in Cash Flow after cash distributions it is 1.01. If you add in Cash Flow after distributions and adding back in the current long term debt it is 1.54. The Debt Ratio is good at 2.18. This Debt Ratio drops to 1.99 currently, but this is still a good ratio. The Leverage and Debt/Equity Ratios for 2019 are good at 1.85 and 0.85. The current ones are fine at 2.01 and 1.01.
The Total Return per year is shown below for years of 5 to 22 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 | 3.04% | 8.64% | 2.71% | 5.93% |
| 2009 | 10 | 1.57% | 11.69% | 4.81% | 6.88% |
| 2004 | 15 | 2.67% | 10.28% | 3.46% | 6.83% |
| 1999 | 20 | 2.86% | 12.55% | 5.80% | 6.75% |
| 1997 | 22 | 27.48% | 14.19% | 13.29% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.99, 14.02, and 15.54. The corresponding 10 year ratios are 12.92, 13.98, and 15.29. The corresponding Historical Ratios are 13.65, 16.85, and 19.07. The current P/E Ratio is 11.38 based on a stock price of $20.96 and 2020 EPS estimate of $2.24. This stock price testing suggests that the stock price is relatively cheap.
Since this is an Income Trust, we need to look at Funds from Operations (FFO). The 5 year low, median, and high median Price/FFO Ratios are 13.23, 14.37 and 15.51. The corresponding 10 year ratios are 13.23, 14.69 and 16.19. The current P/FFO Ratio is 9.79 based on 2020 FFO estimate of 2.14 and a stock price of $20.96. This stock price testing suggests that the stock price is relatively cheap.
Since this is an Income Trust, we need to look at Adjusted Funds from Operations (AFFO). The 5 year low, median, and high median Price/AFFO Ratios are 13.93, 15.15 and 16.33. The corresponding 10 year ratios are 13.93, 15.15 and 16.35. The current P/AFFO Ratio is 12.19 based on 2020 AFFO estimate of 1.72 and a stock price of $20.96. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $33.86. The 10 year low, median, and high median Price/Graham Price Ratios are 0.81, 0.88 and 0.95. The current P/GP Ratio is 0.58 based on a stock price of $20.96. 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 1.24. The current P/B Ratio is 0.82 based on a Book Value of $4,317, Book Value per Share of $25.52 and a stock price of $20.96. The current P/B Ratio is 34% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Cash Flow per Share Ratio of 15.77. The current P/CF Ratio is 10.50 based on last 12 month Cash Flow of $337.8M, Cash Flow per Share of $2.00 and a stock price of $20.96. The current P/CF Ratio is 33% 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 5.84%. The current dividend yield is 8.83% based on a current dividend of $1.85, and a stock price of $20.96. The current dividend yield is 51% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 5.60%. The current dividend yield is 8.83% based on a current dividend of $1.85, and a stock price of $20.96. The current dividend yield is 58% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 6.57. The current P/S Ratio is 4.50 based on Revenue estimate for 2020 of $788M. The current P/S Ratio is 32% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is relatively cheap. Both the dividend yield tests are showing this result as is the P/S Ratio test. The other rests are showing the same results. I can find no problem with any of the prices.
Is it a good company at a reasonable price? This is a Dividend Growth stock. REITs tend to have good dividend yields and low growth. This is what this company has. The problem is that with Covid 19 it is hard to know how it will affect REITs. So far, shareholders have done well with this stock. It might be a REIT to consider if you are looking to buy a REIT.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (2) and Hold (5). The consensus would be a Buy. The 12 month stock price is $24.88. This implies a total return of 27.33%, with 18.70% from capital gains and 8.83% from dividends.
Now I want to look at stock prices and stock price testing. If I move the current price to $30.96 from $20.96 what would be the results of stock price testing? The beauty of spreadsheets is you can answer an “what if?” question. In this case what if the stock price was $10 higher at $30.96. What would be the testing result? The thing is that the way I test, the stock price would have to move a fair bit to get a different result. In this case, I am moving the stock price up 47.7%. Result is below.
The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.99, 14.02 and 15.54. The corresponding 10 year ratios are 12.92, 13.98 and 15.29. The corresponding Historical Ratios are 13.65, 16.85 and 19.07. The current P/E Ratio is 13.82 based on a stock price of $30.96 and 2020 EPS estimate of $2.24. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Since this is an Income Trust, we need to look at Funds from Operations (FFO). The 5 year low, median, and high median Price/FFO Ratios are 13.23, 14.37 and 15.51. The corresponding 10 year ratios are 13.23, 14.69 and 16.19. The current P/FFO Ratio is 14.47 based on 2020 FFO estimate of 2.14 and a stock price of $30.96. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Since this is an Income Trust, we need to look at Adjusted Funds from Operations (AFFO). The 5 year low, median, and high median Price/AFFO Ratios are 13.93, 15.15 and 16.33. The corresponding 10 year ratios are 13.93, 15.15 and 16.35. The current P/AFFO Ratio is 14.79 based on 2020 AFFO estimate of 1.72 and a stock price of $30.96. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $33.86. The 10 year low, median, and high median Price/Graham Price Ratios are 0.81, 0.88 and 0.95. The current P/GP Ratio is 0.88 based on a stock price of $30.96. This stock price testing suggests that the stock price is relatively reasonable and at the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.24. The current P/B Ratio is 0.82 based on a Book Value of $4,317, Book Value per Share of $25.52 and a stock price of $30.96. The current P/B Ratio is 2% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 15.77. The current P/CF Ratio is 10.50 based on last 12 month Cash Flow of $337.8M, Cash Flow per Share of $2.00 and a stock price of $30.96. The current P/CF Ratio is 2% 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 5.84%. The current dividend yield is 5.98% based on a current dividend of $1.85, and a stock price of $30.96. The current dividend yield is 2% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 5.60%. The current dividend yield is 5.98% based on a current dividend of $1.85, and a stock price of $30.96. The current dividend yield is 7% above the historical median dividend yield. 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 6.57. The current P/S Ratio is 6.64 based on Revenue estimate for 2020 of $788M. The current P/S Ratio is 2% below the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable and above the median.
Results of stock price testing is that the stock price is that the stock price is relatively around the 10 median. Results are showing with a price of $30.96 that that price is just below or just above the median.
Analysts on Stock Chase have mixed views on this REIT. Adam Othman on Motley Fool thinks you are better off with an aristocrat REIT. A writer on Simply Wall Street is worried about the high debt leverage of this company. A writer on Simply Wall Street looks at ownership of this REIT. Financial Nirvana Mama on YouTube talks about this stock and RIOCan.
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 Wednesday, September 9, 2020 around 5 pm. Today on my other blog I will write about Mini Parks.... learn more on Tuesday, September 8, 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.
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