Q: Opinion please about Artis REIT which pays a steady distribution but not much else happens. Recent results not enlightening.
Thank you.
Thank you.
5i Research Answer:
REITs are typically 'low growth' securities as they pay out most of their cash flow, leaving less capital available for growth initiatives. AX has the additional burden of owning some office properties, which nobody really likes right now. Its small size also is a factor. Still, it pays an 8.3% distribution and is priced very well at 9X cash flow. Risks are likely reflected in the valuation. The payout ratio is high at 88%, so there is not a lot of cushion on the distribution. It is not our favourite REIT and it is certainly higher risk, but not really that terrible, overall. But we would not expect big gains here.