Q: Hi Peter,
I have CAR.UN in my RRSP account for a number of years. It has performed poorly for the past year, though interest rate is heading downward which should be good for REITs. What are the reasons, apart from immigration restriction, for the negative momentum for CAR.UN? I’ve a 13% loss on this stock and I am thinking of selling it with no tax loss benefit and buy another REIT. Please suggest a few REITs that will provide a stable dividend and flourish in this economy. I’m thinking NWH.UN can be one possibility but it is at a year high. I already owned DIR.UN, BEI.UN and PLZ.UN. Thanks.
I have CAR.UN in my RRSP account for a number of years. It has performed poorly for the past year, though interest rate is heading downward which should be good for REITs. What are the reasons, apart from immigration restriction, for the negative momentum for CAR.UN? I’ve a 13% loss on this stock and I am thinking of selling it with no tax loss benefit and buy another REIT. Please suggest a few REITs that will provide a stable dividend and flourish in this economy. I’m thinking NWH.UN can be one possibility but it is at a year high. I already owned DIR.UN, BEI.UN and PLZ.UN. Thanks.
5i Research Answer:
We do not think CAR.UN has done anything 'wrong', but for years it had a premium multiple and this has now faded a bit, resulting in price weakness. It is 14X cash flow. It has been closer to 20X in prior years. Its last quarter was OK, the payout ratio is 58%, quite acceptable. We would not consider it a sell, but as noted population growth is important for the residential sector. We would be comfortable if selling with NWH.UN or DIR.UN as a replacement, or BEI.UN if staying in the residential sector.