As it becomes apparent Alberta’s economy isn’t going to recover quickly like in 2009, many stocks with oversized exposure to the province are settling into a pattern of sideways trading.
Boardwalk REIT (TSX:BEI.UN) has settled into such a range, staying close to $50 per share for approximately a month. Is this a good buying opportunity?
Results have been somewhat weak, as would be expected. Approximately 60% of the company’s nearly 33,000 apartments are located in Alberta, with rents falling and vacancies increasing dramatically. Funds from operations fell to $1.53 per share for the first half of 2016 compared to $1.79 per share last year.
After years of management selling assets and not buying due to high valuations, the company has finally begun expanding again. Thus far in 2016, Boardwalk has announced it’s spending nearly $145 million to acquire 747 units in Calgary and Edmonton. Additionally, the company plans to build 150 additional units in Regina.
Boardwalk’s strong balance sheet ensures it can keep expanding and take advantage of depressed prices. It owes $2.4 billion in total debt compared to $5.9 billion in assets, giving it a debt-to-assets ratio of just 40.6%. Most other REITs are usually closer to 50%.
Shareholders can also count on the company to at least maintain its 4.4% yield. With a payout ratio of approximately 70%, investors can be confident dividends will continue.
Boardwalk is doing what it needs to get through these tough times. When Alberta recovers, investors will likely be happy they bought shares today.
