Is it a good company at a reasonable price? I bought this stock for diversification and it is a decent stock for me. The thing with REITs is that they tend to have monthly distributions. Most stock pay quarterly and you can end up with a big difference in dividend income over every 3 month period. I think that the stock price is current reason and below the median.
I own this stock of RioCan Real Estate (TSX-REI.UN, OTC-RIOCF). I first bought this stock in 1998 because I wanted to diversify my portfolio into REITs. It was a stock covered and recommended by MPL Communications in their Income Trust coverage. Over the years I have made several more purchases of this REIT.
When I was updating my spreadsheet, I noticed I have bought shares over the years since 1998 (25 years) and have made a total return of 10.01%, with 0.95 from capital gains and 9.06% from dividends. REITs are always heavy with dividend returns but I would expect the capital gains and dividend returns to be more balanced.
If you had invested in this company in December 2012, for $1,019.72 you would have bought 37 shares at $27.56 per share. In December 2022, after 10 years you would have received $494.88 in dividends. The stock would be worth $781.81. Your total return would have been $1,276.69.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $27.56 | $1,019.72 | 37 | 10 | $494.88 | $781.81 | $1,276.69 |
The dividend yields are good with dividend growth restarted. The current dividend growth is good (5% to 6% ranges) at 5.13%. The 5, 10 and historical median dividend yield are also good at 5.60%, 5.36% and 6.73%. The dividends were cut in 2021. The company started to raise them again in 2022. However, the dividends are still 25% below the dividends paid in 2020. I have data for 28 years, of these years, dividends were raised 20 times and cut 1 time. The last dividend increase was in 2023 and it was for 5.9%.
The Dividend Payout Ratios (DPR) are for fine for the important ones for FFO and AFFO. The DPR for 2022 for EPS is 131% with 5 year coverage at 95%. The DPR for EPS for 2023 is expected to be 62%. The DPR for Funds from Operations (FFO) for 2022 is 59% with 5 year coverage at 73%. The DPR for Adjusted Funds from Operations (AFFO) for 2022 is 70% with 5 year coverage at 90%. The DPR for Cash Flow per Share (CFPS) for 2022 is 57% with 5 year coverage at 79%. There is a disagreement among sites as to what the Free Cash Flow is.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2022 is 0.88. Real Estate companies have lots of debt and this is fine. The Liquidity Ratio for 2022 is 0.90, which is unusually low for this company with a 5 year median ratio of 2.62. If you add in Cash Flow after dividends it is 1.42. The Debt Ratio for 2022 is good at 2.05. The Leverage and Debt/Equity Ratios for 2022 are good at 1.95 and 0.95.
The Total Return per year is shown below for years of 5 to 28 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | -6.46% | 2.71% | -2.80% | 5.52% |
| 2012 | 10 | -3.07% | 2.83% | -2.62% | 5.45% |
| 2007 | 15 | -1.81% | 6.12% | -0.21% | 6.33% |
| 2002 | 20 | -0.45% | 11.53% | 2.67% | 8.86% |
| 1997 | 25 | 1.07% | 12.31% | 2.94% | 9.37% |
| 1993 | 28 | 3.10% | 13.94% | 3.88% | 10.06% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 9.38, 10.43 and 12.17. The corresponding 10 year ratios are 10.55, 11.59 and 12.64. The corresponding historical ratios are 11.67, 12.51 and 14.31. The current P/E Ratio is 12.23 based on a stock price of $21.04 and EPS estimate for 2023 of $1.72. This ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have Funds from Operations (FFO) data. The 5-year low, median, and high median Price/AFFO Ratios are 10.54, 12.87 and 14.86. The corresponding 10 year ratios are 12.55, 13.78 and 15.32. The current P/FFO Ratio is 11.89 based on a stock price of $21.04 and FFO estimate for 2023 of $1.77. This ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have Adjusted Funds from Operations (AFFO) data. The 5-year low, median, and high median Price/AFFO Ratios are 10.54, 12.87 and 14.86. The corresponding 10 year ratios are 12.55, 13.78 and 15.32. The current P/AFFO Ratio is 11.66 based on a stock price of $21.04 and FFO estimate for 2023 of $1.54. This ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $32.01. The 10-year low, median, and high median Price/Graham Price Ratios are 0.73, 0.79 and 0.90. The current P/GP Ratio is 0.66 based on a stock price of $21.04. The current ratio is below the low 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 0.97. The current P/B Ratio is 0.82 based on a stock price of $21.04, Book Value of $7,729M, and Book Value per Share of $25.73. The current ratio is 16% 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 15.42. The current P/CF Ratio is 12.49 based on Cash Flow for the last 12 months of 506M, Cash Flow per Share of $1.69 and a stock price of $21.04. 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 getting close to cheap.
I get an historical median dividend yield of 6.73%. The current dividend yield is 5.13% based on a stock price of $21.04 and Dividends of $1.08. The current dividend yield is 24% 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 of 5.36%. The current dividend yield is 5.13% based on a stock price of $21.04 and Dividends of $1.08. The current dividend yield is 4% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10-year median Price/Sales (Revenue) Ratio is 6.69. The current P/S Ratio is 5.36 based on Revenue estimate for 2023 of $1,178M, Revenue per Share of $3.92 and a stock price of $21.04. The current P/S Ratio is 19.8% 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 probably reasonable and may even be cheap. The dividend yield testings are not showing the stock price as cheap because they were recently cut. It is always a bad sign when dividends are cut. However, a recent good sign is that the dividends are again be raised. That is why the stock price might be cheap. Important tests for P/FFO Ratio and P/AFFO Ratio are showing the stock price as reasonable and below the median. And, this I good.
When I look at analysts’ recommendations, I find Strong Buy (4) and Buy (4). The consensus would be a Strong Buy. The 12 month stock price consensus is $25.00. This implies a total return of 23.95% with 18.82% from capital gains and 5.13% from dividends.
Analysts last year on Stock Chase thought it was a buy. Stock Chase gives this company 4 stars out of 5. It is not on the money sense list but no REITs are. It is not on the Maple Money list even though this list has REITs. Demetris Afxentiou on Motley Fool thinks this company is a great way to make passive income. Christopher Liew wrote on Motley Fool about this company’s come back after 2000. The company put out a Press Release on their fourth quarter of 2022 results.
A simply Wall Street report on Yahoo Finance talks about this company and its dividend cut. Simply Wall Street gives this stock 3 stars out of 5. Simply Wall Street gives out 4 warnings for this company of debt is not well covered by operating cash flow; unstable dividend track record; large one-off items impacting financial results; and profit margins (19.2%) are lower than last year (49.4%).
RioCan Real Estate Investment Trust is a Canadian real estate investment trust which owns, develops, and operates Canada's portfolio of retail-focused, increasingly mixed-use properties. The REIT's property portfolio includes shopping centers and mixed-use developments, with most of its properties located in Ontario, Canada. RioCan’s tenants consist of grocery stores, supermarkets, restaurants, cinemas, pharmacies, and corporates. By geography, the company operates in Canada, which generates most of the total revenue, and in the United States. Its web site is here RioCan Real Estate.
The last stock I wrote about was about was Home Capital Group (TSX-HCG, OTC-HMCBF) ... learn more. The next stock I will write about will be H & R Real Estate Trust (TSX-HR.UN, OTC-HRUFF) ... learn more on Friday, March 17, 2023 around 5 pm. Tomorrow on my other blog I will write about Stocks for March 2023 .... learn more on Thursday, March 16, 2023 around 5 pm.
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