Is it a good company at a reasonable price? The stock price is probably reasonable. The P/S Ratio tests show it is close to cheap. They have had some problems recently and cut the dividends. Dividends are back to what they were, but that makes them flat for 7 years. For a REIT, with high dividends, you should expect that dividends would grow at the rate of inflation.
The important measures are the Adjusted Funds from Operations (AFFO) and Funds from Operations (FFO). The AFFO is up only 0.4% per year over the past 10 years and is down by 0.8% per year over the past 5 years. The FFO is up by 1.73% per year over the past 10 years and up by 0.5% over the past 5 years. This is not a great record. Total return is low over the past 15 years. It would not be a favourite REIT of mine.
I do not own this stock of First Capital REIT (TSX-FCR.UN, OTC-FCXXF). Myowneradvistor.com asked me to investigate 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 I it is a slow growing REIT, and this is offset by a good dividend. Revenue is down by 0.04% and up by 2.5% per year over the past 5 and 10 years. The 5 year running average for Revenue is up by 1.9% and 4.5% per year over the past 5 and 10 years. Dividend yield is current 5.19% and the 5 year median dividend yield is 4.51%.
If you had invested in this company in December 2011, for $1,003.40 you would have bought 58 shares at $17.60 per share. In December 2021, after 10 years you would have received $494.43 in dividends. The stock would be worth $1,077.06. Your total return would have been $1,571.49.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $17.30 | $1,003.40 | 58 | 10 | $494.43 | $1,077.06 | $1,571.49 |
The dividend yields are good with dividend growth low to non-existent. The current dividend yield is good (5% to 6% ranges) at 5.06%. The 5 and 10 year median dividend yields are moderate (2% to 4% ranges) at 4.51% and 4.56%. The historical median dividend yield is good at 5.07%. Dividends, until 2015 were being increased most years, but at a low rate (below 8% per year) with a 5 year running rate 1.5%.
At the end of 2019 the company changed to a REIT and in 2020 they started to pay dividends monthly. Dividend used to be quarterly. For 2021, dividends were decreased, but they increased them back to what they were in 2020, in 2022. The last dividend increase was in 2022 and it was for 100% (changed from $0.036 to $0.072, monthly).
The Dividend Payout Ratios (DPR) are fine, with the important ones being for AFFO and FFO. The DPR for EPS for 2021 is 22% with 5 year coverage at 50%. The company is expected to have an earnings loss in 2022, but the 5 year coverage in 2022 is expected to be 79%. The DPR for Adjusted Funds from Operations (AFFO) for 2021 is 49% with 5 year coverage at 78%. The DPR for 2021 is 41% with 5 year coverage at 67%. The DPR for Cash Flow per Share (CFPS) for 2021 is 26% with 5 year coverage at 43%. The DPR for Free Cash Flow for 2021 might be 39% with 5 year coverage at 63%. (There are differences in what different sites think is the FCF.)
Debt Ratios are probably fine. The Long Term Debt/Market Cap Ratio for 2021 is 0.93. The Long Term Debt/Coving Assets Ratio is 0.40. These are fine. The Liquidity Ratio for 2021 is 0.70 and with cash flow less dividends it is still very low at 0.89. However, if you add back in the current debt due, it is 2.52. A problem could occur where in a recession they cannot turn over their debt. The Debt Ratio is 1.86 and that is good. The Leverage Debt/Equity Ratios are fine at 2.17 and 1.17.
The Total Return per year is shown below for years of 5 to 27 to the end of 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | -11.47% | 2.12% | -1.82% | 3.93% |
| 2011 | 10 | -5.23% | 5.44% | 0.87% | 4.58% |
| 2006 | 15 | -3.21% | 5.19% | 0.55% | 4.64% |
| 2001 | 20 | -1.24% | 11.52% | 4.22% | 7.30% |
| 1996 | 25 | -0.19% | 9.23% | 3.09% | 6.14% |
| 1994 | 27 | 1.29% | 12.54% | 4.58% | 7.96% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 10.85, 11.94 and 13.02. The corresponding 10 year ratios are 11.73, 13.40 and 15.06. The corresponding historical ratios are 15.87, 18.04 and 19.71. The current P/E Ratio is negative, so I cannot do testing with that. The P/E Ratio for 2023 is expected to be 15.53 based on a current stock price of $17.08 and EPS estimate for 2023 of $1.10. This ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive. EPS is not an important number when dealing with REITs. AFFO and FFO is more important.
The 5-year low, median, and high median Price/Funds from Operations (FFO) are 13.91, 16.43 and 18.40. The corresponding 10 year ratios are 16.03, 17.65 and 19.46. The current P/FFO Ratio for 2022 is 14.98 based on a stock price of $17.08 and FFO estimate for 2022 of $1.14. This ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
The 5-year low, median, and high median Price/Adjusted Funds from Operations (AFFO) are 15.80, 18.02 and 20.72. The corresponding 10 year ratios are 17.04, 18.46 and 20.62. The current P/AFFO Ratio for 2022 is 16.11 based on a stock price of $17.08 and AFFO estimate for 2022 of $1.06. This 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 Graham Price of $22.69. The 10-year low, median, and high median Price/Graham Price Ratios are 0.86, 0.93 and 1.03. The current P/GP Ratio is 0.75 based on a stock price of $17.08. The current ratio is below the low ratio of the 10 year median ratio. 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 1.11. The current P/B Ratio is 0.85 based on a stock price of $17.08, Book Value of $4,291M and Book Value per Share of $20.08. 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 17.19. The current P/CF Ratio is 14.15 based on Cash Flow for the last 12 months of $258M, Cash Flow per Share of $1.21 and a stock price of $17.08. The current ratio is 18% 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 5.06% based on a stock price of $17.08 and dividends of $0.864. The current dividend yield is 3% 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 4.48%. The current dividend yield is 5.06% based on a stock price of $17.08 and dividends of $0.864. The current dividend yield is 13% above the 10 year 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 6.26. The current P/S Ratio is 5.11 based on Revenue estimate for 2022 of $715M, Revenue per Share of $3.35 and a stock price of $17.08. The current ratio is 18% 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. The dividend yield tests say this and it is confirmed by the P/S Ratio test. However, Dividend Yield tests work best with companies that increase their dividends. The P/AFFO Ratio and P/FFO Ratio tests show the stock price as cheap.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (3) and Hold (1). The consensus would be a Strong Buy. The 12 month stock price consensus is $18.75. This implies a total return of 14.84% with 5.06% from dividends and 9.78% from capital gains based on a current stock price of $17.08.
Some analysts do not like this stock on Stock Chase. Stock Chase gives this company 1 star out of 5. Daniel Da Costa on Motley Fool thinks this is a safe stock to buy for its dividend. Adam Othman on Motley Fool thinks that this stock will bounce back. The company put out a news release on Newswire about their fourth quarter of 2021. The company put out a press release on Newswire about their third quarter of 2022.
Simply Wall Street via Yahoo Finance looks at who owns shares in this company. Simply Wall Street has 3 warnings of earnings have declined by 20.1% per year over past 5 years; interest payments are not well covered by earnings; and unstable dividend track record.
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 Friday, November around 5 pm. Tomorrow on my other blog I will write about Kyla Scanlon – Substack .... learn more on Thursday, November 24, 2022 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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