Thursday, March 25, 2010

Killam Properties added

I added  Killam Properties to the divident lover portfolio.  I know I said no Reits, however this reit is not a reit lol. it pays an eligible dividend. and so is tax efficient for me to hold it in a non registered account.

Company Description:
Killam Properties is the largest apartment landlord in Atlantic Canada with over 8,900 apartments and also owns more than 9,200 manufactured home lots across Canada.

I am a firm believer that realestate is the path to riches. I am a fan of Reits but only when they are trading below NAV, as this one currently is:

At $8.27, Killam trades at 10.5x 2010E FFO, a 13% discount to our NAV estimate of $9.50 (at a 7.00% cap rate), and yields 6.8%. Our 12- to 18- month price target is $9.50 (from $9.00) or approximately 12.0x 2010E FFO. We continue to rate Killam Properties Sector Outperformer.
Picking up realesate below NAV has always been a no brainer so long as you've done your due dilligence. The payout ratio is a respectable 72% of FFO which is respectable for a reit.

Reits are also known as poor mans strategy for investing in realesate. Reits pass on to their owners some of the rewards of owning realesate however reits do not provide their owners with  phantom income (from depriciation), tax defferals, and tax deductions. On the other hand, reits are more liquid and less hands on.

And of course Killam pays an eligible dividend, which is what the dividend lover portfolio is all about

Stock Rating: Sector Outperformer
Sector Weighting: Overweight

12-18 mo. Price Target $9.50
KMP-TSX (3/3/10) $8.27
Avg. Daily Trading Vol. 70,600
Market Capitalization $318.4M
Dividend/Div Yield $0.56 / 6.8%
Net Asset Value $9.50 per Shr

FFO per Share Prev Current
2009 $0.73E $0.73A
2010 $0.80E $0.79E
2011 $0.82E

2009 11.3x 11.3x
2010 10.3x 10.5x
2011 10.1x

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