Is it a good company at a reasonable price? I would worry about the Liquidity Ratio. This can cause problems, especially in bad economic times. Although dividends are now going up, the company does not have a good record of dividend increases. The minimum you would want from a REIT is 6% dividends and 2% capital gains to get 8% total return. I would wonder about this company being above the do that over the long term. The stock price is currently reasonable. Some of the tests, like the P/S Ratio test say the stock price is cheap. Recent insider buying is a positive.
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. Several people I correspond with mentioned this REIT. However, my first view of it is not positive.
When I was updating my spreadsheet, I noticed that insiders are buying, including CEO, CFO and Chairman. Insider buying is at 0.63%, where normal would be at 0.01% to 0.02%. This is after the company had both a bad year and bad quarter. Revenue declined by 11% in 2022 and 0.8% in the first quarter. AFFO declined 1% in 2022 and 6% in the first quarter. FFO went up in 2022 by 3.7% but declined by 3.6% in the first quarter. Cash Flow decline in 2022 by 29% and by 15% in the first quarter.
If you had invested in this company in December 2012, for $1,000.96 you would have bought 64 shares at $15.64 per share. In December 2022, after 10 years you would have received $557.06 in dividends. The stock would be worth $576.64. Your total return would have been $1,133.70. This is a total return would be 1.71% per year with a capital gain of 5.37% and dividends of 7.07%.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $15.64 | $1,000.96 | 64 | 10 | $557.06 | $576.64 | $1,133.70 |
The current dividend yield is high with dividend growth restarting maybe. The current dividend yield is good (7% and above ) at 8.39%. The 5 year median dividend yield is good (5% to 6% ranges) at 5.41%. The 10 year and historical dividend yields are high at 7.14% and 7.14%. Of the past 17 years, dividends have been increased 5 time and decreased 2 times. The rest of the time they were flat. The dividends were decreased in 2018 and 2019 by 50%. Dividends were increased in 2021 by 11% and have been flat since.
Some Dividend Payout Ratios (DPR) are for 2022 are not good, but 5 year coverage is fine. The DPR for 2022 for EPS is negative as there was an earnings loss. The 5 year coverage is at 77%. The DPR for 2022 for Adjusted Funds from Operations (AFFO) is 63% with 5 year coverage at 61%. The DPR for 2022 for Funds from Operations (FFO) is 43% with 5 year coverage at 44%. The DPR for 2022 for Cash Flow per Share (CFPS) is 48% with 5 year coverage also at 48%. The DPR for 2022 for Free Cash Flow (FCF) is 113% with 5 year coverage at 60%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | -315.79% | 77.02% |
| AFFO | 63.16% | 61.22% |
| FFO | 43.17% | 44.12% |
| CFPS | 47.82% | 47.85% |
| FCF | 113.48% | 59.97% |
Liquidity Ratio is awful and the rest of the debt ratios are fine. The Long Term Debt/Market Cap for 2022 is high for fine for 2022 but is too high currently at 1.21. The Long Term Debt went down in 2023, but so did the stock price. The Debt Ratio is good at 1.96. Leverage and Debt/Equity Ratios are fine at 2.04 and 1.85.
The Liquidity Ratio is awful at 0.30 and even Cash Flow after dividends it is only 0.35. You want it at 1.50 or higher. If you add back in current Long Term Debt it is 3.93. If you do this always check that they can roll over debt. Another problem with low Liquidity Ratio is that good assets may have to sold at fire sale prices in bad times to pay current debts. Low Liquidity Ratios are a problem.
| Type | Ratio '22 | Ratio Curr |
|---|---|---|
| Lg Term R | 0.93 | 1.21 |
| Intang/GW | 0.00 | 0.00 |
| Liquidity | 0.30 | 0.15 |
| Liq. + CF | 0.35 | 0.20 |
| Liq,CF,DB | 3.93 | 1.49 |
| Debt Ratio | 1.96 | 2.17 |
| Leverage | 2.04 | 1.85 |
| D/E Ratio | 1.04 | 0.85 |
The Total Return per year is shown below for years of 5 to 18 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 | -11.09% | -3.02% | -8.57% | 5.55% |
| 2012 | 10 | -5.71% | 1.71% | -5.37% | 7.07% |
| 2007 | 15 | -3.66% | 4.51% | -3.37% | 7.88% |
| 2004 | 18 | -1.27% | 16.62% | 2.14% | 14.48% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 10.06, 13.19 and 16.33. The corresponding 10 year ratios are 10.23, 12.27 and 13.54. The corresponding historical ratios are 3.60, 3.92 and 4.23. The historical ones are low because this stock had earnings losses for the first 8 years. The current P/E Ratio is 15.54 based on a stock price of $17.15 and EPS estimate for 2023 of 0.46. 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.
I also have Adjusted Funds from Operations (AFFO) data. The 5-year low, median, and high median Price/AFFO Ratios are 9.40, 11.67 and 13.40. The corresponding 10 year ratios are 9.51, 11.78 and 13.34. The current P/AFFO ratio is 9.79 based on a stock price of $17.15 and AFFO estimate for 2023 of $0.73. 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 Funds from Operations (FFO) data. The 5-year low, median, and high median Price/FFO Ratios are 6.55, 8.13 and 9.70. The corresponding 10 year ratios are 7.47, 8.78 and 9.88. The current P/FFO ratio is 6.22 based on a stock price of $17.15 and FFO estimate for 2023 of $1.15. 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 $18.08. The 10-year low, median, and high median Price/Graham Price Ratios are 0.53, 0.62 and 0.75. The current P/GP Ratio is 0.40 based on a stock price of $17.15. This ratio is below the low ratio 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 10-year median Price/Book Value per Share Ratio of 0.77. The current P/B Ratio is 0.36 based on a stock price of $17.15, Book Value of $2,296M and Book Value per Share of $19.90. The current ratio is 53% 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 8.43. The current P/CF Ratio is 6.87 based on a stock price of $17.15, Cash Flow per Shar estimate for 2023 of $1.04 and Cash Flow of $120M. 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.
I get an historical median dividend yield of 7.14%. The current dividend yield is 8.39% based on dividends of $0.60 and a stock price of $17.15. The current dividend yield is 18% 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 also of 7.14%. The current dividend yield is 8.39% based on dividends of $0.60 and a stock price of $17.15. The current dividend yield is 18% 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 3.45. The current P/S Ratio is 2.17 based on Revenue estimate for 2023 of $381M, Revenue per Share of $3.30 and a stock price of $17.15. The current ratio is 37% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably reasonable. The dividend yield tests are pointing a reasonable stock price. Although at 18%, it is close the 20% and cheap. The P/S Ratio test says the stock price is cheap. I do like the dividend tests because they deal with current values rather than estimates. Except for the P/E Ratio test (which is not a good one for REITS), the rest of the testing points to a reasonable or cheap stock price.
When I look at analysts’ recommendations, I find Buy (1) and Hold (4). The consensus would be a Hold. The 12 month consensus stock price is $8.85. This implies a total return of 32.17% with 23.78% from capital gains and 8.39% from dividends.
Analysts on Stock Chase think this stock is a buy. Stock Chase gives this stock 4 stars out of 5. It is not on Money Sense list, but this list has no REITs. Ambrose O'Callaghan on Motley Fool says this is a good passive income stock for Canadian Investors. Jitendra Parashar on Motley Fool thinks you should buy this stock for monthly passive income. The company put out a Press Release on Newswire about their 2022 results. The company put out a Press Release on Newswire about their first quarter of 2023 results.
Simply Wall Street via Yahoo Finance talks about the chairman picking up more shares. Simply Wall Street put out one warning of debt is not well covered by operating cash flow. Simply Wall Street gives this stock 2 and one half stars out of 5.
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 selects 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. Its web site is here Artis REIT.
The last stock I wrote about was about was Obsidian Energy Ltd (TSX-OBE, NYSE-OBE) ... learn more. The next stock I will write about will Dorel Industries Inc (TSX-DII.B, OTC-DIIBF) ... learn more on Monday, July 17, 2023 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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