Wednesday, December 2, 2009

H&R Real Estate 2

I am continuing my review of this REIT (TSX-HR.UN) that I follow. I have not blogged before on this stock. One thing to note is that they decreased their dividend in 2009 and so this stock was taken off the dividend lists that I follow.

The thing you notice on this stock in the Insider Buying and Insider Selling reports is that different insiders are buying this stock. In the past year, the CEO, CFO, directors and officers have all been buyers of this stock. The buys occurred not only in the March lows, but also at prices that are more recent. It would appear that insiders are confident that about the future prospects of this stock. This is, of course, a big buy signal.

The next thing to look at is spreadsheet ratios. The 5 year average low for P/E on this stock is almost 17. Sites that show a P/E using last 12 months earnings have a P/E of just over 21. I get a P/E of just over 26 using expected 2009 earnings. Both these P/E ratios are on the high side. The 5 year average high P/E is almost 26. The forward P/E is not much better at just over 25. The basic problem is that this stock is not expected to earn much in the next two years. When I look at the 5 year average yield I find it is just over 7%. The current yield is just over 5%. The reason is the recent dividend cut that took effect in January 2009.

Now, let’s talk about the good ratios. First, the current Price/Book Value is just over 80% of the 10 year average. The last good thing to talk about is that the current price is some 32% lower than the Graham Price. I get a Graham Price for 2009 of $19.62 and one for 2010 of $20.01. Both are higher than the stock price.

Other positive notes are that I calculate Price/Distributable Cash ratios for 2009 or 2010 to be about 9 and just below 9. The 5 year average is just over 12. So, you would be payable a reasonable price for the expected Distributable Cash. Also, the Cash Flow Payout Ratios for 2009 and 2010 are expected to be 60% and 66%. This is better that those in recent years, which were in the 80% to 90% range.

Globe investor gives this stock a 3 star rating. When I look at analysts recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation will be a Buy. (See my site for information on analyst ratings.) There are a number of analysts that follow this stock that feel that the stock is currently underpriced and it will be a very good investment. Certainly, insiders seem to feel this way also. I have no current plans to buy this stock as I already have a couple of REITs that I am currently happy with and at the moment I need no more REIT stock to add to my portfolio.

H&R REAL ESTATE INVESTMENT TRUST (H&R REIT) is an open-ended real estate investment trust. They have a portfolio of office properties, single-tenant industrial properties, retail properties and development projects. They operate principally in the Greater Toronto Area. Its web site is See my spreadsheet at

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at for a list of the stocks for which I have put up spreadsheets. Also, look at other investing notes on my website at

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