The increased uncertainty in the economy and volatility in the stock markets is causing investors to stumble on their investment decisions and looking to diversify their portfolios.
It is widely viewed that real estate is recession-proof. While the large capital investment is the common hurdle that prevents most investors from dipping their feet in the water, we look at real estate investment trusts (REITs) as the welcoming alternative. REITs enable investors to diversify their portfolio by owning shares of real estate properties with the desirable feature of liquidity while earning some steady monthly income.
WPT Industrial Real Estate Investment Trust (“the REIT”) (TSX: WIR.U, WIR.UN) focuses on acquiring, developing, and managing industrial properties primarily located in the United States.
Diving into the fundamentals using Inovestor’s Stock Guide platform, the REIT has demonstrated strong performance YOY with an upward trending revenue and controlled cost of operations. With a decent return on invested capital, the company appears to have no major issue meeting its debt obligations as evidenced by several historical debt-related ratios, a healthy interest coverage ratio, and a comfortable level of cash. It is also worth noting that the operating revenues do not follow the growth of assets and debt. As a result, asset turnover is declining while the return on assets is increasing.
| 2019-12-31 | 2018-12-31 | 2017-12-31 | 2016-12-31 | 2015-12-31 | |
| Accounts Receivable / Days | 8.255 | 7.776 | 7.658 | 7.448 | 6.659 |
| Acid Test | 0.194 | 0.219 | 0.188 | 0.549 | 0.248 |
| Assets to Debt | 4.98 | 3.185 | 2.868 | 2.514 | 2.341 |
| Assets to Debt + EECD | 4.98 | 3.185 | 2.868 | 2.514 | 2.341 |
| Cash Flow to Debt | 0.248 | 0.158 | 0.159 | 0.152 | 0.15 |
| Cash Flow to Debt + EECD | 0.248 | 0.158 | 0.159 | 0.152 | 0.15 |
| Current Ratio | 0.194 | 0.219 | 0.188 | 0.549 | 0.248 |
| Debt to Equity | 0.366 | 0.605 | 0.662 | 0.835 | 1.631 |
| Debt + EECD to Equity – EECD | 0.366 | 0.605 | 0.662 | 0.835 | 1.631 |
| Debt Ratio | 0.268 | 0.377 | 0.398 | 0.455 | 0.62 |
| Debt Ratio + EECD | 0.268 | 0.377 | 0.398 | 0.455 | 0.62 |
| Dividend Payout (Common) | 44.504 | 67.994 | 57.298 | 68.935 | 61.823 |
| Dividend Yield | 7.159 | 8.044 | 7.516 | 8.599 | 8.339 |
| Earnings Yield | 16.749 | 11.727 | 13.114 | 12.4 | 13.435 |
| Interest Coverage | 4.944 | 3.771 | 4.811 | 3.576 | 2.584 |
| Net Profit | 83.347 | 53.175 | 64.199 | 47.791 | 31.977 |
| Price to Book Value | 0.798 | 0.772 | 0.855 | 0.804 | 0.827 |
| Price to Cash Flow | 7.614 | 7.85 | 7.232 | 5.679 | 3.375 |
| Price to Invested Capital | 0.584 | 0.481 | 0.515 | 0.438 | 0.314 |
| Price to EBITDA | 4.68 | 6.204 | 6.041 | 5.808 | 4.547 |
| Price to Sales | 4.977 | 4.538 | 4.896 | 3.853 | 2.372 |
| Price to Earnings | 5.971 | 8.528 | 7.625 | 8.064 | 7.443 |
| Return on Invested Capital | 10.485 | 7.387 | 7.574 | 6.749 | 6.911 |
| Return on Common Equity | 11.555 | 7.08 | 9.537 | 7.488 | 7.506 |
| Return on Assets | 6.097 | 4.378 | 5.148 | 4.154 | 2.868 |
Change in supply chain management will play a key role in the real estate allocation in a portfolio. Given that WPT Industrial Real Estate Investment Trust is engaged mostly in the Industrial sector and the US President’s call to reclaim the global supply chain back in the U.S, investing in companies that are vertically integrated seems to be a good strategy. Intuitively speaking, Industrial REITs will benefit from manufactures relocating operations to North America in search of warehouse and distribution centers
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