Central Banks, Bond Markets Out of Sync – Earnings: SRU, IPL, BNE, DR, HLP
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If you believe the bond market, low interest rates, the fuel for stock price growth, are not about to change anytime soon. The narrowing yield spread between 2 year and 10 year US government bonds and a weakening US dollar is sending a message to the US Central Bank to be careful. Comments this week explain this yield spread, known as the FRED spread and clarify the message it is sending, potentially affecting valuations of both dividend and growth focused equities.
Earnings updates include SmartCentres REIT(SRU.UN, SRU.DB.B), Inter Pipeline Ltd (IPL), Bonterra Energy Ltd (BNE), Medical Facilities Corp. (DR, DR.DB.A) and Mainstreet Health Investments Inc. (HLP.U, HLP.DB).
SmartCentres REIT Q3-2017 results were ahead of last year, for the nine months per unit AFFO per share was $0.02 or 1.3% under last year. The increase in vacancy rates following Target Stores exit from Canada in 2016 has proven temporary as this mainly Walmart anchored REIT remains an attractive location for retailers. SmartCentre, formerly SmartREIT prior to that Calloway REIT, earns 25% of annual rental income from Walmart. SmartCentres is transitioning from a pure retail focused REIT to a developer of residential properties in and around existing shopping centre properties providing a major avenue for growth. The impact of e-commerce is a risk factor; however this still only represents less than 10% of retail sales, visiting a bricks and mortar store is still preferred by most shoppers. Bricks and mortar stores can deploy e-commerce segments much more cheaply than e-commerce by can by locations. Distributions were increased in Nov-2017 with further increases expected from expansion into residential real estate development and sales.
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