Archive for January, 2010

Canadian REITs: No Longer a Bargain

January 18, 2010

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As I noted in an earlier post (See Asset Class Returns for 2009), Canadian REITs were red-hot last year, posting a total return of 55.3%. While REITs are still roughly 25% off their all-time highs, several valuation metrics suggest that they may not be big bargains any more.

Take the distribution yield, for instance. The cash yield on the iShares CDN REIT Sector ETF (TSX: XRE) is approximately 5.45%, a spread of less than 2% over the 10-year Government of Canada bond, which is currently yielding 3.55%. Historically, the REITs have yielded as low as 0.73% over bonds and as high as 10%, suggesting that current yields are at the low end of the range.

Many REITs are also trading at a premium to analyst estimate of net asset value (NAV). RioCan (TSX: REI.UN), the largest REIT in Canada, for instance, is trading at $19.90 but TD Securities analysts estimate the NAV per unit to be just $16.30. RioCan’s current 22% premium to NAV is also in the higher end of its historical range suggesting that Canadian REITs may not be screaming bargains any more.

Helping the Haiti Earthquake Victims

January 14, 2010

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The recent earthquake in Haiti has resulted in a humanitarian disaster of enormous proportions. In addition to providing direct relief, the Government of Canada has announced that it is matching every dollar contributed to eligible Canadian charitable organizations that are supporting the recovery and disaster relief efforts in Haiti. To qualify for the match, the donation must be made by individual Canadians to a registered Canadian charity that is specifically earmarked for the purpose of disaster relief in Haiti and made between January 12 and February 12, 2010 (See FAQs — Haiti Earthquake Relief Fund site for more information).

Here are the some of the organizations (I also found this exhaustive list on CBC that you might find useful) that are specifically soliciting donations to fund emergency assistance and relief efforts in Haiti:

  1. Donations through the Canadian Red Cross, which sent $200,000 immediately to support relief efforts, can be made here.
  2. Donations to the Salvation Army’s Haiti Earthquake Disaster Relief Fund can be made through this website. Salvation Army is also accepting micro-donations of $5 from donors who text HAITI to 45678 from any Rogers or Bell phone.
  3. Donations to UNICEF Canada’s Haiti Earthquake relief efforts can be made here.
  4. Donations to the Humanitarian Coalition Online comprising Oxfam Canada, Oxfam Quebec, Care and Save the Children can be made here.
  5. Médecins Sans Frontières Canada is also directing donations to Haiti relief.
  6. Michael J. points out that World Vision, which has been on the ground in Haiti for more than 30 years, is accepting donations here.
  7. Matt N. says Plan Canada is helping children and families in Haiti. Donations are accepted here.
  8. Samaritan’s Purse, a favourite charity of Joel, is accepting donations here.

If you know of others that you’ve supported in the past, please let me know in the comments and I’ll include them in the list. Typically income tax receipts are issued for donations of $25 or more.

Updates:

Asset Class Returns for 2009

January 13, 2010

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Unlike the previous year, 2009 was a great year for investable assets. Emerging markets and Canadian REITs were big winners — both returned about 55%. Even the asset class with the lowest returns — Short Bonds — returned 4.5%. All in all, it was the best of times for investors. The Canadian dollar appreciated against major currencies, including the US dollar, and dragged down returns from US and other foreign markets.

All Canadian Bonds: 5.4%
Short Canadian Bonds: 4.5%
Real Return Bonds: 14.5%
Canadian Stocks (S&P/TSX Composite): 35.1%
US Stocks (S&P 500): 9.2% (26.5% in USD)
Developed Markets (MSCI EAFE Index): 14.4% (25.4% in local currency)
Emerging Markets: 54.6% (62.8% in local currency)
REITs: 55.3%

If you are interested in asset class returns for previous years, Norbert Schlenker of Libra Investments maintains a spreadsheet of total returns for various asset classes going back to 1970. Total returns for Canadian REITs were obtained from the monthly market statistics published by PWL Capital.

Sources: Bank of Canada, PC Bond Analytics, MSCI Barra and Standard & Poors.