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 owns 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 well with this stock since I received it. My total return is 9.04% with 3.05% from capital gains and 5.48% from dividends.
The dividend yields are good with dividend growth low. The dividend yield is good (5% and 6% ranges) at 5.79%. The 5,7 and historical dividend yields are also good at 5.66%, 5.71% and 5.71%. This stock has only been in existence for 7 years. The dividend increases have been low (below 8%) at 2.63% per year for the past 5 years. The last dividend increase was in 2018 with an increase of 4.2%. Dividends have been flat since.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 is 116% with 5 year coverage at 271%. Because this is a REIT, I also am looking at the DPR for Funds from Operations (FFO) and for Adjusted Funds from Operations (AFFO). The DPR for FFO for 2020 is 80% with 5 year coverage at 72%. The DPR for AFFO for 2020 is 92.5% with 5 year coverage at 87%. The DPR for CFPS is 35% with 5 year coverage at 18%. The DPR for Free Cash Flow for 2020 is 92% with 5 year coverage at 79%.
Debt Ratios could be improved. The Long Term Debt/Market Cap Ratio for 2020 is 0.69. The Liquidity Ratio for 2020 is 1.20. The Debt Ratio is low at 1.29, but is higher than it has been before. I prefer this ratio to be 1.50 or higher. The Leverage and Debt/Equity Ratios are too high at 4.45 and 3.45. I prefer these to be under 3.00 and under 2.00.
The Total Return per year is shown below for years of 5 to 7 to the end of 2020. 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. |
|---|---|---|---|---|---|
| 2015 | 5 | 2.63% | 7.89% | 1.97% | 5.92% |
| 2013 | 7 | 1.87% | 9.19% | 3.08% | 6.11% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.08, 11.08 and 12.08. The corresponding 7 year and historical ratios are 11.60, 12.46 and 13.35. The current P/E Ratio is 20.05 based on a stock price of 12.77 and EPS of last 12 months of $0.64. This stock price testing suggests that the stock price is relatively expensive because the current P/E Ratio of 20.05 is above the high median P/E Ratio of 7 years.
Because this is a REIT, I will also look at Price/Funds from Operations (FFO) Ratios. The 5 year low, median, and high median P/FFO Ratios are 11.54, 12.94 and 14.65. The corresponding 7 year ratios are 11.40, 12.81 and 13.99. The current P/FFO Ratio is 13.30 based on a stock price of $12.77 and FFO estimate for 2021 of $0.96. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Because this is a REIT, I will also look at Price/Adjusted Funds from Operations (AFFO) Ratios. The 5 year low, median, and high median P/AFFO Ratios are 13.54, 15.46 and 17.28. The corresponding 7 year ratios are 13.66, 15.39 and 16.78. The current P/AFFO Ratio is 14.85 based on a stock price of $12.77 and AFFO estimate for 2021 of $0.86. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $13.85. The 7 year low, median, and high median Price/Graham Price Ratios are 0.78, 0.88 and 0.96. The current P/GP Ratio is 0.92 based on a stock price of $12.77. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 7 year median Price/Book Value per Share Ratio of 1.26. The current P/B Ratio is 1.44 based on a stock price of $12.77, Book Value of $3,513.8M and a Book Value per Share of $8.88. The current ratio is 14% above the 7 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 7 year median Price/Cash Flow per Share Ratio of 3.55. The current P/CF Ratio is 8.14 based on Cash Flow for the last 12 months of $621M, Cash Flow per Share of $1.57 and a stock price of $12.77. The current ratio is 129% above the 7 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 7 year and historical median dividend yield of 5.71%. The current dividend yield is 5.79% based on dividend of $0.74. The current dividend yield is 1.5% above the 7 year and historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 7 year median Price/Sales (Revenue) Ratio is 6.94. The current P/S Ratio is 6.82 based on Revenue estimate for 2021 of $1,353M. The current ratio is 1.7% below the 7 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable. The Dividend Yield test and the P/S Ratio test both show that the stock price is reasonable and below the median. It is below the median by under 2%. The P/E Ratio is high, but for REITs, analysts like using the FFO and AFFO values and these tests show the stock price is reasonable. For the P/CF test, I only have the last 12 months data, so I wonder how valid the test is.
Is it a good company at a reasonable price? The stock price does seem reasonable. This a rather new REIT as it has only been in business for 7 years and it is growing. I own it because it bought out the CDN REIT I owned. I have no intentions of selling this at the present time.
When I look at analysts’ recommendations, I find Buy (1) and Hold (7). The consensus would be a hold. The 12 month stock price is $13.81. This implies a total return of $13.94% with 8.34% from capital gains and 5.79% from dividends. TD Securities says that give it a Hold because of its current valuation in relation to its peers.
The last two analysts’ entries on Stock Chase are Buy and Do not Buy. Nikhil Kumar on Motley Fool call this the best Real Estate value stock in Canada. The Executive Summary on Simply Wall Street gives this stock 3 stars out of 5 and 4 risks. However, this is an American site and often interpret dividends paid in CDN$ as unstable dividends. A writer on Simply Wall Street likes the high ROE until you consider that this comes also with a high debt. Simon Thompson on YouTube discuss this REIT and other CDN REITs. It has a starting ad, and the discussion on this stock starts around 3.25 minutes into the video.
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 centers 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 ARC Resources Ltd (TSX-ARX, OTC-AETUF) ... learn more on Wednesday, February 24, 2021 around 5 pm. Tomorrow on my other blog I will write about Top 100 dividend stocks of 2021.... learn more on Tuesday, February 23, 2021 around 5 pm.
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