“You’ll Be a Walmart Millionaire Within 18–24 Months!”

By Travis Johnson, Stock Gumshoe, December 6, 2010

That headline comes from the top of the latest teaser ad from Roger Conrad for his Canadian Edge newsletter — and he usually recommends relatively sedate high-income investments like utilities and Canadian trusts, which made the pitch for this idea stand out as a bit extra-hypey for him … and therefore, of course, I wanna know what the stock is.

Here’s how he introduces this “Walmart Millionaire” stock:

“This is like walking down the street and picking up hundred-dollar bills… You might as well go ahead and add three zeros to your brokerage account balance!

“You’ll Be a Walmart Millionaire Within 18–24 Months! Without EVER Buying a Single Share of Walmart Stock…

“Your profits are guaranteed by the world’s largest retailer. This is the fastest, safest, most reliable way to grow your investment capital in 2011.”

This, like the (very different) older pitch for Deer Consumer Products (DEER) that I sniffed out early this year, is a “buy the companies that have a deal with Walmart” pitch — if you missed your chance to become a Walton bazillionaire by buying the stock back in 1980, can you catch up by buying a stock that will get a lift from its relationship with the world’s largest retailer going forward?

As Conrad puts it,

“Find companies that have recently signed a new deal or are expanding an existing relationship with the world’s biggest retailer, and you’ll retire a wealthy man in a decade or less.

“Time and time again, when this 900-pound gorilla partners with a small, publicly traded company, that company’s stock skyrockets into the stratosphere….

“In my research department, we’ve dubbed it…

“The Walmart Wealth Effect”

So that’s nothing all that new or revolutionary, of course — even though a relationship with Walmart can be a double-edged sword for a small supplier, thanks to the relentless cost pressure that Sam Walton’s minions are trained to apply to widget-makers, it also opens up a huge new market and gets your product into these hugely popular stores. If you sell to Walmart, and you can keep your costs low enough to maintain some semblance of a profit margin, your sales have a chance to explode.

But this isn’t the typical “Walmart supplier” teaser about a small company about to open a new market, even though that’s how Conrad’s copywriter makes it sound at first. Here’s more from the ad to explain:

“If you think selling eggs to Walmart makes a stock pop, imagine being Walmart’s landlord for the next 50 years!

“I’ve identified a brand-new opportunity for you to fully leverage the Walmart Wealth Effect… all the way to the bank!

“Up until recently, Walmart was buying more than $800 million worth of land EACH MONTH…

“Today, Walmart has the same ravenous appetite for land. But the retail giant is leasing properties. Not buying.

“Walmart’s strategic plan in North America during the next few decades calls for leasing property to penetrate big urban areas like the District of Columbia, Philadelphia and New York City.

“And after successfully testing prototype models, the big-box behemoth is poised to begin a neighborhood rollout in 2011 of its smaller-format, higher-end Marketside stores.

“After carefully evaluating over 130 different companies and 9 Indian tribes during the past year and a half, I’ve identified one Real Estate Investment Trust that is going to end up being the BIG Walmart winner!”

So there you have it — I may quibble with the idea that being one of Walmart’s landlords is a more “leveraged” way to get the “Walmart wealth effect” than investing in a small company with a new Walmart distribution deal, but it’s certainly a more likely way to get current dividend income from a Walmart-related investment … and it’s probably likely to be a more stable stock.

So which REIT is it that Conrad sees as the best way to get a “pop” from Walmart?

Thankfully, we get a few more clues:

“This Real Estate Investment Trust is exclusively focused on retail real estate. Their core strategy involves leasing neighborhood shopping centers anchored by supermarkets.

“The Trust owns and manages a huge portfolio of popular shopping centers in big urban areas in Canada and the northeastern United States. Their ownership interest contains an aggregate of over 60 million square feet.

“My top-secret recommendation has already inked multiple lease agreements with the world’s biggest retailer. The term on these lease agreements is typically 20 years, plus six 5-year renewals, for a total of 50 years!

“Of course, Walmart isn’t their only blue-chip client. The Trust has a diverse roster of Fortune 500 clients including Safeway and Giant grocery stores, Lowe’s, PetSmart and Staples….

“In the third quarter, the Trust completed six acquisitions. This new pool of earnings has not yet been factored into the future monthly distribution payments to unit-holders.

“I would conservatively estimate this Trust could end up skyrocketing by more than 400% over the next few quarters, no matter what happens in the U.S. economy or the stock market.”

So that’s about all we get by way of clues — let me just feed all that into the Thinkolator, hit the US: Canadian translation switch … and, there! This must be …

Riocan Real Estate Investment Trust (REI.UN or REI-UN in Toronto, RIOCF on the pink sheets in the US).

Riocan is certainly not a small company that will shoot to the moon as news of their Walmart relationship leaks out, it is the largest REIT in Canada and, while it is the landlord for about 25 Walmart stores and Walmart is their third largest tenant by revenue as of the last quarter, Walmart provides less than 5% of their revenues. They are extremely diversified across retail, they do lease to Safeway, Lowe’s, PetSmart and Giant, as teased above, but their top ten tenants list is weighted more to Canadian retail names that won’t be as familiar to US investors (Canadian Tire, Zellers, Loblaws, etc). They own a little bit of office real estate, but overwhelmingly this is a retail play, with a few enclosed malls and a lot of “new format” retail (which seems to be mostly big box centers and “town centers”) and supermarket-anchored (or Walmart anchored, I suppose) strip malls.

And while they are expanding in the US because that’s where they see some better-priced opportunities these days, mostly through joint ventures with a couple US REITs in the Northeast and in Texas, and they should soon have 5% of their revenue coming from the US (it’s 3% as of the last quarter), they are overwhelmingly a Canadian company. Ontario alone, thanks in part to the higher revenue from Toronto-area retail, makes up well over 50% of their annual rental revenue, with Quebec coming in a distant second.

I don’t know the company well and had never looked at them before today, but if you’re interested in Canadian retail this may well be an intriguing stock to research — their comparisons with bit US retail REITs look pretty good: leverage is relatively low, though that’s no longer as unusual after the cash-raising of the credit crisis; clients are extremely diversified with no one client accounting for more than 5% of revenue; they have the opportunity to cut financing costs on some of their mortgages and have recently raised both debt and equity financing at good terms; they’re profitable and growing funds from operations and have consistently high occupancy rates; and they pay a substantially higher yield than all the big US retail REITs I’ve checked.

With a monthly dividend currently at 11.5 cents, that gives an annual payout of C$1.38 and a current yield of over 6% from a C$22 share price. That’s not overwhelming, of course, but it is being covered reasonably well by funds from operations, they are making acquisitions, as teased that may give them some ability to raise the payout in the future (they haven’t raised it since 2008, but did raise it annually before then), and it’s certainly more than you’ll get from comparable (though the comparisons are arguable in each case) retail REITs in the US like Kimco (KIM — 4.2%), Realty Income (O — 5%), Macerich (MAC — 4.1%) or Simon Property Group (SPG — 3.1%).

I assume that US investors probably pay the same withholding tax as they would for non-real-estate trusts (last I saw from RioCan, for their 2008 info, this was still a 15% withholding tax — and it’s due even on IRA holdings). And if you’re worried about that “Halloween Surprise” change to the tax law a few years back which means that trusts lose their tax-free status in January, don’t worry — this is a REIT, which will still get the tax pass-through status that is, in effect, practically identical to the US tax treatment of US REITs.

So, if you’re asking your friendly neighborhood Gumshoe, I’d say that if you’re not already pretty close to being a millionaire I can’t imagine this stock getting you there within two years … and asking for a 400% return from a large, reasonably valued and moderately growing REIT seems a bit ambitious — oh, and Walmart is a nice and growing client, but “Wall Street” isn’t going to make these shares double just because someone soon realizes that RioCan owns 25 (or soon 30 or so, perhaps) Walmart store locations. I don’t know whether RioCan has any particular connection with Walmart’s recurring fascination with smaller store test projects, but I suppose it’s possible — and also probably pretty insignificant for the bottom line into the foreseeable future.

But that’s obviously hype to sell a newsletter, it doesn’t mean it can’t be an attractive income or dividend-compounding stock (as long as the Ontario economy doesn’t collapse). And if you’re a believer in the continuing power of the Canadian Dollar, it may well be that a steady income in that currency means even more to you than US dividend income. I don’t own the shares, but they do look more appealing to me than most of the US retailer REITs I’ve looked at in the last six months. If you’re interested in digging deeper, they have a good investor presentation here with their third quarter results [pdf file] and a solid overview of the business, or their full reports are available here.

So what do you think? Is RioCan the kind of dividend income you’re looking for? Prefer something else in the retail REIT space, or something else entirely to cover your monthly bills? Let us know with a comment below.

Full disclosure: I have owned several of the companies mentioned above in the past, but do not have a direct current interest in any stock mentioned. I will not trade in any stock mentioned above for at least three days per my rules.


Related Gumshoe Articles

Leave a Reply

40 Comments on "“You’ll Be a Walmart Millionaire Within 18–24 Months!”"

avatar

stuart
Guest
0
stuart
December 6, 2010 2:44 pm

This security is part of the Canadian Edge portfolio, from Roger Conrad's rag….It has performed well over the last 2 years..

Frank
Guest
0
Frank
May 15, 2012 4:43 pm

Hi Stuart,
I readed an article about the Wal-Lord on the internet and came on this site (stockgumshoe). I don’t know exactly about what REIT Conrad is talking about but I doubt between Collawaw and Riocan. In this forum two (or maybe more) people aks you for sending the ticker symbols of the Canadian Edge portfolio. Is it possible to get this up-to-date list from you? What is your opinion about these REITS? In my opinion, I think its going about Calloway (CWT). Thanks already for your reaction! (My emailadress is frankvvelsen@hotmail.nl)

Best regards,
Frank (The Netherlands)

bingo1611
Guest
0
bingo1611
December 6, 2010 5:26 pm

Another possibility is Calloway RIET which is listed on the TSX as CWT>UN

Regards, larry

Des
Guest
0
Des
December 6, 2010 6:13 pm

I'm new to all this, and inersted in both the REITs mentioned. How does one buy on the TSX? What broker to use?

blackjack
Guest
0
blackjack
December 6, 2010 9:50 pm

Australian Banks allow overseas investors to put funds in their banks that pay 7-8% PA
from the interest payment you pay 10% witholding tax – all money up to 1 million dollars is guaranteed by the Government. PLUS the Australian dollar is approx parity with US$

Also why not think about buying a condo in another country and getting rent on it. Thailand now is a great investment and you can pull % and no tax!

Think outside the box

Jack
Guest
0
Jack
December 6, 2010 10:15 pm

Walter Donovon and Steve. If you care to E-mail me privately, I have an article about a group of low beta high dividend stocks. The author suggests the sale of call options to increase the income. This could be just what you are looking for, it was designed for retirement income. I would be pleased to share it with you guys if you wish. Jack My E-mail is: nhhobbyfarmer@yahoo.com

live
Guest
0
live
December 6, 2010 11:17 pm

could you please give me the name of the stock? I really want to be retired early. my email:paid4yoou@gmail.com.

live
Guest
0
live
December 6, 2010 11:18 pm
John Harvey
Guest
0
John Harvey
December 7, 2010 2:31 am

If you are interested in high yield dividend stocks, why not look at AGNC with a dividend of 20% and ARR with a dividend of 19% instead of buying a Canadian REIT and then have to pay 15% of your dividend in Canadian Capital Gains Tax ?

MnKid
Guest
0
MnKid
December 7, 2010 9:55 am

My questions is how can a company that has revenue of $3.47/ share pay out a $5.60 dividend? They have $32 Mil in bank and $4.19 Bil in debt! Can someone educate me on this?

jeff
Guest
0
jeff
December 7, 2010 5:18 pm
trav,I still like "The Monthly Dividend Co" Ticker "O" It is VERY safe. Jeff
dreverts
Guest
0
dreverts
December 8, 2010 4:31 pm

Buyer beware with AGNC, it is definitely not a safe yield play. they are under earning their dividend and have yet to be tested by interest rate volatility.

bill
Guest
0
bill
December 10, 2010 5:49 pm

another play with a great high yield play is symbol CHSCP

Mac
Guest
0
Mac
December 13, 2010 11:34 am

Dividends on canadian stocks held in an IRA are not subject to the canadian 15% withholding tax.

Marcia Krook
Guest
0
Marcia Krook
December 13, 2010 3:19 pm

Not to my knowledge, nor is the return of capital…at least they weren't in my accounts. Check Conrad's Canadian Edge tax Info or the IRS

Marcia
Guest
0
Marcia
December 13, 2010 3:22 pm

I was referring to the oil and gas trusts such as PWE or PVX, not yo any reit or MLP

Sami
Guest
0
Sami
January 19, 2011 1:27 pm

I think you are wrong. It is Retrocom. RMM.un
Pays over 8%. About $6.

Why do you give out incorrect information? I am not 100% sure but it would more likely be a small cap company. Up 6% today.

Please do your homework more diligently before making it seem that you are 100% correct. I think you are wrong.

advantedges
Member
56
advantedges
December 6, 2011 5:41 pm

spelling correction : buying a “significant” number of shares………. as Rick Perry says:
“oooops.” Luckily, I am not running for president, and this was simply a spelling error and not fading memory or alzheimers!

Bob W
Guest
0
Bob W
November 18, 2011 3:44 pm

REI.UN also trades OTC in the US as RIOCF. Conrad doesn’t cover RMM.UN in Canadian Edge.
Conrad rates REI.UN as a “6” for safety, his highest rating, which is of interest for conservative investors.
I like AX.UN (OTC – ARESF) better, another REIT that Conrad covers. Apparently owns high quality commercial and industrial properties, mainly in Canada but some in the US. Currently trades about C13.64, monthly dividend of C0.09 for a 7.93% return, P/E 6.00, P/B 1.033. Conrad rates it “5” for safety and a buy up to US$15.

advantedges
Member
56
advantedges
December 6, 2011 5:37 pm
Well Said, Travis,,,,,,,,,I have followed you for years, and your selection track record has been outstanding! A Plus for a grade. I am not sure what these readers are looking for, especially when the discussion here should focus more on the tease itself: A Walmart Millionaire? PLEASE,,,,,,,,,, Most folks posting on this tease are looking for income, not compounding wealth. How one is supposed to be a millionaire recipient even compounding their gains on the yield from RIOCF or other Canadian trusts is beyond the scope of reason, unless he/she buys signicant numbers of shares. Remember folks, try not to… Read more »
Holistic Hypnosis & Hypnotherapy - Los Angeles
Guest
0

Hi. I used to give these newsletter writers a lot of authority. Because they speak with such bald faced confidence i assumed it must be mostly true. But observing their recomendations over a period of time revealed their feet of clay. Yours was one of the sites that helped cut them down to size a few years ago. Now I kind of ho hum their missives. “If it seems too good to be true it probably is.” as the old saying goes.
Holistic Hypnosis Hypnotherapy Los Angeles

jvsaputo7
Member
0
jvsaputo7
May 17, 2012 7:53 pm

I am 63 and put about 74,000 in about 20 stocks, energy stocks, mining stocks and some good blue chip stocks. I already have an unrealized loss of over 4,000. Oil will probably come back by this fall but it takes your breath away. Is there a safe place to get a monthly high yield for income in your radar?

David A
Guest
0
David A
January 5, 2013 7:53 pm
Check out this REIT “GOV”. It is manages government related properties whereby the US government pays the rent. The biggest cilent is the IRS. Think about it, as messed up as our government is, the IRS is not going to stop doing business. It pays a 7% yield and a .42 cents a quarter Dividend. The thing I like the most is it more SAFE than many REITS. Talk about poetic justice. When the IRS is screwing all of us for TAX- we can collect a 7% yield off them! Try getting 7% out of $100,000 CD. It wont happen.… Read more »
Ezequiel Braverman
Guest
0
Ezequiel Braverman
November 2, 2013 1:31 pm

how can I buy shares of “wal-lord” can some body tell me?

pauline mcpherson-thomas
Guest
0
pauline mcpherson-thomas
May 20, 2014 10:57 pm

I like, I wanna be a millionaire…..

Walter Donovan
Guest
0
Walter Donovan
December 6, 2010 4:04 pm

Stuart: Can you send me the ticker symbols of the Canadian Edge portfolio?
I am an 83 year old retiree looking for safe high dividend stocks to supplement
Social Security. I do not want to subscribe as I probably will only make an
investment or two without trading much.
Walter Donovan–email–in4thqtr@optimum.net
12/6/10

Steve
Guest
0
Steve
December 6, 2010 4:22 pm

Stuart can you also send tha tline to me as well? I am on a disability retirement and only 43 yoa. You can imagine what disability retirements are these days. Anything I could use to support that income would be great. My email is steve71360@yahoo.com. Thanks.

Darcy
Guest
0
Darcy
December 6, 2010 5:54 pm

At first glance Calloway REIT could be teased stock however, if you take at look at Calloway's listings as per their website, none of their 117 properties are located outside of Canada. However, Calloway has 74 Wal-Marts on lease, a much larger exposure to Wal-Mart than Riocan.

mesa1546
Guest
0
mesa1546
December 6, 2010 6:34 pm

You can use Interactive Brokers. They can hold your canadian $ after trading.

bill Newell
Guest
0
bill Newell
December 7, 2010 12:16 am

How do I find out about these Australian Banks. I would be interested in converting and investing to get out of the falling dollar.

Its my understanding youcan find Canadian banks that wil take US depoitors too…its myuderstanding they do have some banks in this country, (USA)
billyboygrand@yahoo.com

Bigg Fredd
Guest
0
Bigg Fredd
December 7, 2010 2:31 am

What you have to watch is what currency is being used. Mexican banks used to pay 30% for peso-denominated accounts, which sounded great until you withdrew your money, only to find your 100,000peso that grew to 130,000peso was now only worth $65,000US, so you LOST 35%!

stuart
Guest
0
stuart
December 7, 2010 3:56 am

Hi Walter, sorry for the delay as I am in a different time zone…
I bought Riocan about 18 months ago through (IB) Interactive Brokers…On their screen it comes up as REI.UN, hope this helps.. Also IB collects all the divis for you..
Stuart

stuart
Guest
0
stuart
December 7, 2010 3:59 am

Hi Steve, sorry for the delay as I am in a different time zone…
I bought Riocan about 18 months ago through (IB) Interactive Brokers…On their screen it comes up as REI.UN, hope this helps.. Also IB collects all the divis for you..
Stuart

Don
Guest
0
Don
December 7, 2010 8:16 am

John, where does the 20% dividend on AGNC come from. I see 5.6%. thanks, Don

MnKid
Guest
0
MnKid
December 7, 2010 9:49 am

Your seeing a $5.60 dividend which is a 19% return.__

Bigg Fredd
Guest
0
Bigg Fredd
December 7, 2010 12:03 pm

Not sure what you're looking at. Yahoo shows a 32¢ loss for ARR, but AGNC has revenue of $6.73.

They have a lot of debt and little cash because their business is renting lots of property, which is their major asset.

MnKid
Guest
0
MnKid
December 7, 2010 1:02 pm

Thanks Biggs,
Don't know where the $3.47 came from because now it's not there. It's $6.73 now. HUMMMMMMM!

Gravity Switch
Admin
11
January 19, 2011 2:09 pm
Sami, please read the actual details before you claim I'm wrong based just on what you think would be "more likely." I do my homework and unless I note that there's any reason for doubt, I am at least 99% sure when I sleuth out a pick, more often 100% if enough details are provided for me to verify conclusively, as there usually are. I think I've been wrong in conclusively identifying teaser picks two or three times in this space, out of more than a thousand stocks discussed over four years, and I still find those mistakes embarrassing and… Read more »
Sami
Guest
0
Sami
April 16, 2012 1:19 pm
Hi: 1. I apologise. I was rough on you. I am impressed by your work. I just could not believe that Conrad would BS people that this Reit would go up 400% in a few quarters. I just received another of his flyers. I resent his BS though for those who can’t do their own homework, his newsletter is informative. He now has an Australian letter. He over charges in my opinion. Also gives out too much info. Makes my head spin. 2. The best performing Canadian Reit seems to be IIP.UN (Interrent), a small REIT up north. AX.UN and… Read more »
wpDiscuz