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Mike May 14, 2012, 7:20 am

Quick Canadian REITs Analysis Guidelines

by: Mike    Category: Canadian REITs Investing
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Quick Canadian REITs Analysis Guidelines

 

I know that you don’t have all the time in the world and that one of the reasons you purchased this book was to save time. After reading the other articles in the Canadian REITs Investing category you may be ready to drop this option and concentrate on dividend stock picking. REITs analysis will require you to look deeper into financial statements since most information you need cannot be taken from the stock screener of financial websites. This is why I’m summarizing the above mentioned guidelines to give you a clear and quick idea of what you should be looking for:

 

FFO & AFFO under 100% – you are looking for viability

Dividend Yield over 3% – you are looking to get paid

5 Years Dividend Growth positive – you are looking to get paid more

LVT under 65% – a lot of equity means more leverage options and cheap debt

Geographic diversification – 55% of revenue or less by province + preferably a small exposure to USA market (it will bounce back one day or another).

Tenant diversification – less than 5% of revenue by tenants + sector diversification

 

You can also read our stock screener tutorial that will help you to find interesting Canadian REITs to add to your portfolio. Free stock screeners won’t give you FFO and AFFO data but it will at least help you building your Canadian REITs watch list. From these results, you can download each Real Estate Investment Trust’s financial statement and find out the rest of the information.

Financial translation from Stocks to REITs

Still confused about what to track for a stock and what to track for a REIT? Here’s a quick “translation chart” that will help you figure out what you should be looking for when searching for a REITs, considering you have a background in investing in stocks.

Stocks REIT
Earnings Earnings (Rent + Proceeds from sale)
Price to Book Ratio NAV
Dividend Payout Ratio FFO & AFFO
Debt to Equity Ratio Loan to Value Ratio
Dividend Growth Same! Yeah!
Growth Potential Increase of rent, management abilities, future projects
Gross Margin Occupancy Rate

 

You will find most of this information within REIT financial statements. While stock screeners and other financial website will present you Canadian REITs data the very same way they would do it with any other Canadian stocks, you must dig a little deeper to make sure you buy the right investment trust. It’s easy to be blinded by a high yield but the AFFO, NAV and growth potential or very important.

 

 

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Comments

[...] FFO & AFFO are probably the most useful tools to analyze a Canadian REIT. Since REITs main reason for existing is the distribution of its revenue, you must look at how [...]

[...] you need help analysing REITs, I suggest you look out for our Quick Canadian REITs Analysis Guidelines. In this article, we “translate” the common stock analysis language to the equivalent for [...]







The Most Complete Canadian REITs Reference