How Should Investors Feel About Killam Apartment Real Estate Investment Trust's (TSE:KMP.UN) CEO Remuneration?

Simply Wall St
October 26, 2020

Philip Fraser became the CEO of Killam Apartment Real Estate Investment Trust (TSE:KMP.UN) in 2000, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the funds from operations and shareholder returns of the company.

View our latest analysis for Killam Apartment Real Estate Investment Trust

Comparing Killam Apartment Real Estate Investment Trust's CEO Compensation With the industry

At the time of writing, our data shows that Killam Apartment Real Estate Investment Trust has a market capitalization of CA$1.8b, and reported total annual CEO compensation of CA$1.7m for the year to December 2019. We note that's a small decrease of 4.4% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at CA$650k.

On comparing similar companies from the same industry with market caps ranging from CA$1.3b to CA$4.2b, we found that the median CEO total compensation was CA$1.9m. So it looks like Killam Apartment Real Estate Investment Trust compensates Philip Fraser in line with the median for the industry. Moreover, Philip Fraser also holds CA$7.2m worth of Killam Apartment Real Estate Investment Trust stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20192018Proportion (2019)
Salary CA$650k CA$650k 37%
Other CA$1.1m CA$1.2m 63%
Total CompensationCA$1.7m CA$1.8m100%

Talking in terms of the industry, salary represented approximately 32% of total compensation out of all the companies we analyzed, while other remuneration made up 68% of the pie. It's interesting to note that Killam Apartment Real Estate Investment Trust pays out a greater portion of remuneration through salary, compared to the industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

TSX:KMP.UN CEO Compensation October 26th 2020

A Look at Killam Apartment Real Estate Investment Trust's Growth Numbers

Over the past three years, Killam Apartment Real Estate Investment Trust has seen its funds from operations (FFO) grow by 16% per year. It achieved revenue growth of 9.8% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Killam Apartment Real Estate Investment Trust Been A Good Investment?

We think that the total shareholder return of 45%, over three years, would leave most Killam Apartment Real Estate Investment Trust shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

As previously discussed, Philip is compensated close to the median for companies of its size, and which belong to the same industry. Investors would surely be happy to see that returns have been great, and that FFO is up. So one could argue that CEO compensation is quite modest, if you consider company performance! In fact, shareholders might even think the CEO deserves a raise as a reward due to the fantastic returns generated.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 3 warning signs for Killam Apartment Real Estate Investment Trust (of which 1 is significant!) that you should know about in order to have a holistic understanding of the stock.

Important note: Killam Apartment Real Estate Investment Trust is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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