I do not own this stock of First Capital Realty (TSX-FCR.UN, OTC-FCXXF). Myowneradvistor.com asked me to look into this stock. 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 sometime when looking at Free Cash Flow at different sites, I wonder if I am looking at the same company. With this company, I checked and I was looking at the same company, but FCF are extremely different. Neither set of figures make any sense.
The dividend yields are currently good with dividend growth currently non-existent. The current dividend is good (5% and 6% ranges) at 5.51%. The 5, 10 and historical median dividend yields are moderate (2% to 4% ranges) at 4.21%, 4.56% and 4.89%. The dividend increases used to be low at around 2% per year, but there has been no increase in dividends since 2016.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2019 is 49% with 5 year coverage at 53%. Unfortunately, analysts feel that the DPR for 2020 will be in the range of 316% (with 5 year coverage at 57%). The DPR for CFPS for 2019 was 44% with 5 year coverage at 48%. This is too high and would prefer it to be at 40% or less of CFPS. I do not know what to make of the Free Cash Flow I can find so I am not covering this under DPR.
Debt Ratios are fine. The Long Term Debt/Market Cap is 0.97. The Liquidity Ratio is 0.63 and if you add in cash flow after dividends, you get only to 0.77. Only by adding back the current portion of the long term debt do you get a reasonable ratio of 1.82. (You have to ensure that this current portion of long term debt is rolled over.) The Debt Ratio is 1.79 and this is good. The Leverage and Debt/Equity Ratio are fine at 2.27 and 1.27, respectively.
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 | 0.35% | 6.68% | 2.26% | 4.42% |
| 2009 | 10 | 0.73% | 9.63% | 4.42% | 5.20% |
| 2004 | 15 | 1.19% | 9.66% | 3.89% | 5.77% |
| 1999 | 20 | 2.17% | 12.16% | 5.16% | 7.00% |
| 1994 | 25 | 6.46% | 12.96% | 5.38% | 7.58% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 11.17, 12.89 and 14.60. The corresponding 10 year ratios are 11.73. 13.40 and 15.06. The corresponding historical ratios are 16.30, 18.83 and 20.41. The current P/E Ratio is 57.78 based on a stock price of $15.60 and EPS estimate for 2020 of $0.27. This stock price testing suggests that the stock price is relatively expensive.
However, the EPS drops in 2020 by some 84%. If we look at the P/E Ratio for 2021, which is now not far away, the P/E Ratio is 15.45 based on a stock price of $15.60 and EPS estimate for 2021 of $1.01. The last 12 month EPS is also $1.01 and that is to the end of the third quarter, so you have to wonder about an EPS for 2020 of just $0.27. However, this stock price testing suggests that the stock price is relatively reasonable but above the median.
Since this stock is now a REIT, we should also look at the Price/Funds from Operations Ratios. The 5 year low, median, and high median Price/Earnings per Share Ratios are 16.00, 17.61 and 18.42. The corresponding 10 year ratios are 16.03, 17.65 and 18.88. The current P/FFO Ratio is 15.76 based on a stock price of $15.60 and FFO estimate for 2020 of 0.99. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $20.75. The 10 year low, median, and high median Price/Graham Price Ratios are 0.88, 0.96 and 1.03. The current P/GP Ratio is 0.75 based on a stock price of $15.60. 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 1.15. The current P/B Ratio is 0.81 based on a Book Value of $4,234M, Book Value per Share of $19.32 and a stock price of $15.60. The current ratio is 30% 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 17.45. The current P/CF Ratio is 15.15 based on Cash Flow per Share for last 12 months of $1.03, Cash Flow of $227 and a stock price of $15.60. The current ratio is 13% 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 4.89%. The current dividend yield is 5.51% based on dividends of $0.86 and a stock price of $15.60. The current dividend yield is 13% 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 4.56%. The current dividend yield is 5.51% based on dividends of $0.86 and a stock price of $15.60. The current dividend yield is 21% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 6.26. The current P/S Ratio is 5.06 based on Revenue estimate for 2020 of $675M, Revenue per Share of $3.08, and a stock price of $15.60. The current ratio is 19% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. It is almost cheap.
Results of stock price testing is that the stock price is cheap to reasonable. The median dividend yield tests say the stock price is cheap to reasonable and this is confirmed by the P/S Ratio test which says the stock price is reasonable, but it is very close to the cheap side. Most of the rest of the testing is showing the stock as either cheap or reasonable.
Is it a good company at a reasonable price? The stock price is reasonable. I like dividend growth stocks and this stock is currently not a dividend growth stock. With REITs, l like the dividends to at least grow at the rate of inflation when the yield is good. Currently, the dividends are not growing and the last increase was 5 years ago. However, dividends or distributions did grow in the past. If the company does again grow their distribution in the future, I would feel differently about this stock.
Historical background inflation is 3%, but we are in, supposedly, a historically low inflation period. (Although I really doubt this as my expenses have grown more than the low inflation rate the government is showing.)
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (2) and Hold (3). The consensus would be a Buy. The 12 month stock price is $17.79. This implies a total return of 19.55% with 14.04% from capital gains and 5.51% from dividends.
The last analyst to remark on this stock on Stock Chase did not like it because it is in the retail space. Daniel Da Costa on Motley Fool thinks you should buy this stock because it is way too cheap. The executive summary on Simply Wall Street nicely summarizes this stock. It gets two stars out of 5 stares. A writer on Simply Wall Street says the CEO has a higher than industry median remuneration. The company announces the Third Quarterly Results for 2020 on Newswire.
First Capital REIT is a developer, owner, and operator of mixed-use urban real estate in Canada's populated centres. The company's focus is on creating thriving neighbourhoods that create value for businesses, residents, communities, and investors. Its web site is here First Capital Realty.
The last stock I wrote about was about was Wild Brain Ltd (TSX-WILD, OTC- WLDBF) ... learn more. The next stock I will write about will be Stella-Jones Inc (TSX-SJ, OTC-STLJF) ... learn more on Monday, December 7, 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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