I do not own this stock of First Capital REIT (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 that low EPS for 2020 was due to decrease in value of investment properties, mostly. By the third quarter of 2021, the EPS was good due an increase in investment properties, mostly. EPS for 2020 was $0.01. For the third quarter of 2021, EPS was $1.95 compared to the third quarter of 2020, where EPS was as loss of $0.16.
The dividend yields are moderate with dividends declining. The current dividend yield is moderate (2% to 4%) at 2.33%. The 5, 10 and historical dividend yields are also moderate at 4.21%, 4.56% and 4.95%. This used to be a dividend growth stock, all be it with very low growth. The dividends were cut by 50% in 2021. Analyst do expect the dividends to be increased again starting in 2023.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 is 8598% with 5 year coverage at 59%. The DPR for EPS is expected to fall to 46% this year. The DPR for CFPS for 2020 is 49% with 5 year coverage at 48%. There is a big difference in what different site quote for the Free Cash Flow. You have to wonder about using the FCF to judge DPR.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2020 is 1.50 and 1.00 at present. It is high, but The Debt/ Assets Ratio is 0.47 is fine. The stock price fell in March 2020 and it has been slow to recover. The Liquidity Ratio in 2020 is low at 0.87 and adding in cash flow after dividends it is still low at 0.93. Current Liabilities/Asset Ratio is very low and good at just 0.06. The Debt Ratio is good at 1.74. The Leverage and Debt/Equity Ratios are fine at 2.36 and 1.36 respectively.
The Total Return per year is shown below for years of 5 to 26 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 | 0.00% | -0.61% | -5.88% | 5.28% |
| 2010 | 10 | 0.72% | 4.76% | -1.08% | 5.84% |
| 2005 | 15 | 0.92% | 5.61% | -0.39% | 6.00% |
| 2000 | 20 | 2.17% | 15.13% | 4.55% | 10.58% |
| 1995 | 25 | 2.45% | 11.10% | 2.94% | 8.15% |
| 1994 | 26 | 6.20% | 12.23% | 3.44% | 8.80% |
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 16.38, 19.62 and 21.11. The current P/E Ratio is 8.80 based on a stock price of $18.57 and EPS estimate for 2021 of $2.11. This stock price testing suggests that the stock price is relatively cheap.
However, the EPS for 2021, is higher than for 2022 and 2023. The EPS drops 50% to 2022. The EPS estimate for 2021 is 1.08 and for 2023 is 1.14. Using the current stock price of $18.57, we end up with P/E Ratios for 17.19 and 19.29, respectively. Both these are above the 10 year high median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $23.10. The 10 year low, median, and high median Price/Graham Price Ratios are 0.87 and 0.95 and 1.03. The current P/GP Ratio is 0.80 based on a stock price of $18.57. The current ratio is below the low 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 1.14. The current P/B Ratio is 0.88 based on a Book Value of $4,609M, Book Value per Share 20.99. The current ratio is 23% 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 ratio is 15.84 based on last 12 month’s cash flow of $259M, Cash Flow per Share of $1.17 and a stock price of $18.57. The current ratio is 9% 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 4.95%. The current dividend yield is 2.33% based on dividends of $0.432 and a stock price of $18.57. The current dividend yield is 53% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. The problem is that the dividends were recently cut by 50%.
I get an historical median dividend yield of 4.56%. The current dividend yield is 2.33% based on dividends of $0.432 and a stock price of $18.57. The current dividend yield is 49% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. The problem is that the dividends were recently cut by 50%.
The 10 year median Price/Sales (Revenue) Ratio is 6.26. The current P/S Ratio is 6.00 based on Revenue estimate for 2021 of $679M, Revenue per Share of $3.09 and a stock price of $18.57. The current ratio is 4% 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 when tested against the past 10 years. The P/S Ratio test says this as does the P/CF Ratio. The P/B Ratio test says that it is cheap. The Dividend Yield tests are not good because of a dividend cut. (But dividend cuts also signal problems.)
I look at the total return over a number of years. For P/S Ratio and P/E Ratio, the lower the ratio the cheaper the stock. For yield, the higher the yield, the cheaper the stock. In the chart below you can see that the P/E Ratio is relatively low compared to the past, but the P/S Ratio is high compared to the past, while the Dividend Yield is lower than in the past.
In the following chart the total return for the 10 years to December 31, 2020 is 4.76% per year. The beginning yield was at 5.29%, and the P/E Ratio and the P/S Ratio were at 58.12 and 5.04. Does this chart change my opinion of the stock price? This chart maybe telling us that the stock price might be currently expensive. Good returns in the past had much lower P/E Ratios and much higher Dividend Yields.
| # Years | Total Ret | Beg P/E | Beg P/S | Beg Yield |
|---|---|---|---|---|
| 5 | -0.61% | 20.16 | 6.30 | 4.69% |
| 10 | 4.76% | 58.12 | 5.04 | 5.29% |
| 15 | 5.61% | 46.00 | 6.05 | 5.22% |
| 20 | 15.13% | -4.60 | 0.92 | 10.07% |
| 25 | 11.10% | 15.90 | 1.66 | 7.16% |
| 26 | 12.23% | 2.49 | 5.88% | |
| current | 8.80 | 6.00 | 2.52% |
Is it a good company at a reasonable price? Generally, you buy REITs because of the good dividend yields and for diversification into Real Estate. At least I do. With a dividend yield of 2.33% on a REIT you are not getting the yield. REITs are also not known for good increases and that is one reason you look at yield. Personally, I am not much interested in this REIT at the present time.
Say the stock price does go to $21.36, it does not change the total return in the years from 5 to 26 in the chart above much except for the 5 year total return. If the stock price goes to $21.36, the 5 year total return would be around 4.42%. The 10 year total return would be 6.49%. The 15 year total return would be 5.81%. The 20, 25 would be slightly lower.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (2) and Hold (2). The consensus would be a Strong Buy. The 12 month stock price consensus is $21.36. This implies a total return of 17.35% with 15.02% from capital gains and 2.33% from dividends based on a current stock price of 18.57.
The last three analysts’ recommendations on Stock Chase were Top Pick, Hold and Do Not Buy. Daniel Da Costa on Motley Fool says it has recovered well from the pandemic and today offers investors some significant value. Amy Legate-Wolfe on Motley Fool thinks this is a good stock for a passive income portfolio. A Simply Wall Street article on Yahoo Finance looks at who owns shares in this company. The company talks about their third quarterly results on Newswire.
Note: I will no longer have links to Simply Wall Street as they have monetized their site. It does not help if I can get access to it. My readers would not be able to so it is now useless for my purposes.
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 REIT.
The last stock I wrote about was about was FirstService Corp (TSX-FSV, NASDAQ-FSV) ... learn more. The next stock I will write about will be Stella-Jones Inc (TSX-SJ, OTC-STLJF) ... learn more on Monday, November 29, 2021 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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