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Investments comments are at blog. Last updated October 17, 2012.

Friday, March 13, 2015

RioCan Real Estate

Sound bite for Twitter and StockTwits is: Core REIT holding. Companies have their ups and downs and are not always great all the time. If you are a long term investor, you can expect this and make allowances for it. However, overall you need to do well in a stock to keep it. I believe I have done well in this stock in the long term. See my spreadsheet at rei.htm.

I own this stock of RioCan Real Estate (TSX-REI.UN, OTC-RIOCF). I first bought this stock 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.

The distribution growth rate has been low lately. The problem is that the Dividend Payout Ratios were too high. The 5 year median DPR for Adjusted Funds from Operations (AFFO) is 99.3%. Until 2011 it was over 100%. The DPR for AFFO for 2014 is 93.4% a much better figure. It is expected to continue to decline even with expected dividend increases.

For 4 of the past 5 years, there has been no dividend increases. This makes the dividend growth rate low for the last 5 years. The 5 and 10 year dividend growth rate is 0.4% and 1.4%. The only increase was in 2013 and it was for 2.2%. Some analysts think that there will be some minor increases in 2015 and /or 2016.

This is a REIT and what I would expect from dividends would be a good dividend rate and growth at or just above the inflation level. Until recently, this REIT met my expectation. Currently the growth in distributions has been low but I do expect this to improve when they back to doing dividend increases.

According to the Bank of Canada, inflation in Canada is running at 1.45% over the past 10 years, 1.13% over the past 5 years and 0.85% over the past 3 years for total inflation. Also it is running at 1.56% over the past 10 years, 1.34% over the past 5 years and 1.24% over the past 3 years for core inflation.

I have done well in this stock. The current dividend yield on my stock bought in 1998 is 12.88% and for that bought in 2000 it is 16.89%. If you look at all my purchases, I have paid $18.97 per share. My dividends to date under this stock are at $15.24 per share. This means that 80% of my purchase price has been paid by dividends.

Over all my total return is at 15.18% per year with 6.78% per year from capital gains and 8.40% from dividends. The 5 and 10 year total return is 10.49% and 7.50% per year with 4.66% and 1.94% per year from capital gains and 5.83 and 5.55% per year from dividends. When interest rates start to rise again at some future date, capital gains will decline.

The outstanding units have increased by 5.5% and 5.6% per year over the past 5 and 10 years. Units have increased due to Units Issued, DRIP and Stock Options. Units have decreased due to buy backs. As with other REITs, the change in accounting rules in 2011 dramatically affected both EPS and Book Values. Growth in the last 5 years has been better than in the last 10 years for Revenue, AFFO, FFO and Cash Flow. As a shareholder, I am more interested in per share values to properly judge growth.

Revenue has grown at 9.7% and 7.6% per year over the past 5 and 10 years. Revenue per share is a lot lower at 4% and 1.9% per year.

AFFO and FFO growth is moderate for the last 5 years and low for the last 10 years. The AFFO growth is 6.7% and 2% per year over the past 5 and 10 years. FFO growth is 6.6% and 2% per year over the past 5 and 10 years.

You can see big differences in Cash Flow and Cash Flow per Share growth as you can for Revenue. The Cash Flow growth over the past 5 and 10 years is at 13.8% and 7% per year. CFPS is at 8% and 1.3% per year over the past 5 and 10 years.

The Debt Ratio and Leverage Debt/Equity Ratios are all good. The Debt Ratio for 2014 is 2.16 and the 5 year median value is 2.13. The Leverage Debt/Equity Ratios for 2014 are 1.87 and 0.87. The 10 year median values are higher at 2.67 and 1.67. This is because the ratios have been declining lately.

This is the first of two parts. The second part will be posted on Monday, March 16, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

RioCan is Canada’s largest real estate investment trust exclusively focused on retail real estate. Their core strategy is to own and manage community-oriented neighbourhood shopping centers anchored by supermarkets, together with a rapidly expanding mix of new format retail centers. RioCan owns interests in 51 centers in the United States located in the Northeastern United States and Texas, managed through its offices in New Jersey and Dallas. Its web site is here RioCan.

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.