I do not own this stock of Artis REIT (TSX-AX.UN, OTC-ARESF). Early in 2013, this company was mentioned as a good REIT to own. A number of people I correspond with mentioned this REIT. However, my first view of it is not positive. It is also not a dividend growth stock.
When I was updating my spreadsheet, I noticed over the past year there was a lot of buying around the $11.00 price range. Insider buying was 1.4% of market cap. Usual insider buying and selling is 0.1% or 0.2% of market cap. The new CEO bought 18M shares worth currently around $213M. Both the new CFO and Chairman have also bought shares.
The dividend yields are good with dividend growth restarted. The dividend yield for the REIT is good (5% to 6% ranges) at 5.13%. The 5, 10 and historical median dividend yields are high (7% and over) at 8.21%, 7.49% and 7.49%. Over the past 15 years, dividends have gone up 3 times and down 2 times. Mostly they were flat. The increases were when dividends were starting to be paid and the decreases were recent, in 2018 and 2019. In 2021 dividends were increased by 11%. Analysts do not expect another increase in 2022.
The Dividend Payout Ratios (DPR) are fine as they are expected to improve in 2021. The DPR for EPS for 2020 is 2700% with 5 year coverage at 115%. The DPR for EPS is expected to be 43% in 2021. EPS was very low in 2020. The DPR for CFPS for 2020 was 41% with 5 year coverage at 59%. DPR for Free Cash Flow for 2020 was 46% with 5 year coverage at 61%.
Because this stock is a REIT, I also have DPRs for Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO). The DPR for FFO for 2020 is 38% with 5 year coverage at 39%. The DPR for AFFO for 2020 is 53% with 5 year coverage at 51%.
Debt Ratios are fine, but it would be wise to improve the Liquidity Ratio. The Long Term Debt/Market Cap Ratio for 2020 is 0.78. The Liquidity Ratio for 2020 is just 0.20. You have to add back in the current portion of the long term debt and cash flow after dividends to get a value over 1.00, and in this case, it is 1.25. I like to see this ratio at 1.50 without adding the current long term loan back in. With the way we get the Liquidity Ratio, any slip up and the company could have problems paying current liabilities. The Debt Ratio is good at 1.92. The Leverage and Debt/Equity Ratios are 2.08 and 1.08 and are fine.
The Total Return per year is shown below for years of 5 to 16 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 | -12.94% | 3.66% | -3.59% | 7.26% |
| 2010 | 10 | -6.70% | 6.05% | -2.12% | 8.17% |
| 2005 | 15 | -2.13% | 6.74% | -1.56% | 8.31% |
| 2000 | 20 | 17.32% | 3.50% | 13.83% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.82, 15.28 and 17.74. The corresponding 10 year ratios are 10.23, 12.27 and 13.54. The corresponding historical ratios are 4.53, 5.00 and 5.48. The current P/E Ratio is 8.54 based on a stock price of $11.70 and EPS for the last 12 months of $1.37. The current P/E Ratio is below the low 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
Since this is a REIT, we should look at P/FFO also. The 5 year P/FFO Ratios are 7.08, 7.19 and 9.70. The 10 year P/FFO Ratios are 8.21, 9.28 and 11.04. The current P/FFO ratio is 8.48, based on a stock price of $11.70 and FFO estimate for 2021 of 1.38. The current ratio is between the low and median P/FFO Ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Since this is a REIT, we should look at P/AFFO also. The 5 year P/AFFO Ratios are 8.92, 10.48 and 13.40. The 10 year P/AFFO Ratios are 9.46, 11.33 and 13.34. The current P/FFO ratio is 11.47 based on a stock price of $11.70 and AFFO estimate for 2021 of $1.02. The current ratio is between the median and high P/FFO Ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $21.66. The 10 year low, median, and high median Price/Graham Price Ratios are 0.55, 0.65 and 0.74. The current P/GP Ratio is 0.54 based on a stock price of $11.70. The current ratio is below the low ratio of the 10 year median ratios. 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 0.86. The current P/B Ratio is 0.77 based on a stock price of $11.70, Book Value of $2,341M and Book Value per Share of $15.23. The current ratio is 10% 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 8.98. The current P/CF Ratio is 8.30 based on Cash Flow for the last 12 months of $189.9M, Cash Flow per Share of $1.41 and a stock price of $11.70. The current ratio is 7.6% 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 7.49%. The current dividend yield is 5.13% based on a stock price of $11.70 and dividends of $0.60. The current yield is 32% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield also of 7.49%. The current dividend yield is 5.13% based on a stock price of $11.70 and dividends of $0.60. The current yield is 32% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 3.71. The current P/S Ratio is 3.42 based on a stock price of $11.70, Revenue estimate for 2021 of $461M and Revenuer per Share of $3.42. The current ratio is 7.9% below the 10 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 and below the median. This is the test result of the P/S Ratio test and a number of other tests. The dividend yield tests are questionable because of the history of flat dividends and recent dividend declines.
Is it a good company at a reasonable price? The stock price is probably reasonable. The past history of dividends is not good. I like dividend growth stocks and this has not been one. However, the company has recently reorganized. The new CEO, CFO and Chairman have bought shares in the company, so this is a good indicator.
When I look at analysts’ recommendations, I find Buy (2), and Hold (6). The consensus would be a Hold. The 12 month stock price consensus is $12.25. This implies a total return of 9.83% with 4.70% from capital gains and 5.13% from dividends. Since this is a REIT, you would expect a large portion of the total return to be from dividends. Also note that since it is a REIT, the dividend can be taxed as different sorts of income and probably not as a dividend.
Analysts have mixed feelings about this company on Stock Chase. Chris MacDonald on Motley Fool thinks this stock is attractive at the present time. The executive summary on Simply Wall Street gives this stock 4 stars out of 5 and list one risk. The company announces its transformation plan on Newswire. This is one of three Canadian REITs to buy on Advice for Investors.
Artis Real Estate Investment Trust is an unincorporated closed-end REIT based in Canada. Artis REIT's portfolio comprises properties located in Central and Western Canada and select markets throughout the United States, including regions such as Alberta, British Columbia, Manitoba, Ontario, Saskatchewan, Arizona, Minnesota, Colorado, New York, and Wisconsin. The properties are divided into three categories: office, retail, and industrial. The industrial properties account for most of the portfolio, followed by the office properties and the retail properties. Its web site is here Artis REIT.
The last stock I wrote about was about was Obsidian Energy Ltd (TSX-OBE, OTC-OBELF) ... learn more. The next stock I will write about will be Dorel Industries Inc (TSX-DII.B, OTC-DIIBF) ... learn more on Monday, July 19, 2021 around 5 pm.
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