Brookfield Office Properties

On my other blog I am today writing about the Money Show in Toronto for 2012...continue...

I do not own this stock Brookfield Office Properties (TSX-BPO, NYSE-BPO). I started to track this stock because it was on the Dividend Aristocrats List (see indices) and I was not tracking it. . Note that this company is no longer on the Dividend Aristocrats list. This company is own 49% by Brookfield Asset Management Company (TSX-BAM.A).

Dividends are paid in US$, so a Canadian investor will have dividends fluctuating with currency exchange. In CDN$ terms dividends have decreased marginally over the past 5 years at 0.76% per year. Over the past 10 years they have increased by 9.37% per year. In US$ terms dividends have increased over the past 5 and 10 years at 1.89% and 14.34% per year, respectively. Over the next while CDN$ will probably stay around parity, so there should not be such a discrepancy between US$ dividends and CDN$ dividends going forward.

Dividend Payout Ratios have fluctuated a lot over the years. The 10 year median DPRs are 51% of EPS and 48% of Cash Flow. The DPR for earnings is expected to be around 50% in 2012. The DPR for cash flow over the past 12 months is 59%. This company has not raised dividends since 2008 and even then, the last increase was only for 1.8%, a very low raise.

Canadians have not made much on this stock recently. The 5 year total return is a negative 9.28% per year. Dividends attributable to this 5 year return would be at 2.55% per year and there is a capital loss of 11.83% per year. The 10 year total return is better, but not great with returns of 6.50% per year. Some 3.46% per year of this return is attributable to dividends and there is a capital gain of 2.60% per year. US investors have fared a bit better, but not that significantly better.

The shares outstanding have increased by 4.9% and 3.3% per year over the past 5 and 10 years. They have issued options, issued shares under DRIP and also have bought back shares. There have also been a couple of years when new shares have been issued.

Revenues can fluctuate. In this case, revenues are down 2.41 and 1.33% per year over the past 5 and 10 years in US$ terms. Revenues per Share is down by 5.9% and 5.5% per year over the past 5 and 10 years in US$ terms. The difference, of course, is because of the increase in shares over the past 5 and 10 years.

Currently Earnings per Share growth looks very good with growth at 51% and 17% per year over the past 5 and 10 years in US$. The problem is that EPS can fluctuate. EPS is expected to drop over 60% in 2012. They have not any negative earnings years, but the EPS does fluctuate.

As far as Cash Flow per share goes, over the past 5 years CFPS has grown by 21% per year in US$ terms. Over the past 10 years, CFPS has declined by 3.8% per year in US$ terms. The problem here is that CF also fluctuates, but company does tend to have positive cash flow.

As far a book value per share, it has grown at least twice as fast in US$ terms than in CDN$ terms. However, it has not done badly in CDN$ terms growing over the past 5 and 10 years at the rate of 15% and 8% per year in CDN$ terms.

The Return on Equity bounces around a lot also. It has been good over the last few years with the ROE for 2011 at 20.9%. The ROE based on comprehensive income is a bit lower (some 17% lower) at 17.4%. This is still a very good ROE. (ROE is the same in CDN$ and US$ terms).

I have only calculated the Liquidity Ratio for a couple of years and it is very low at 0.37. It is always very low. The current Debt Ratio is quite good at 1.86. This ratio has not always been as good as the 5 and 10 year median Debt Ratios are 1.39 and 1.38.

The current Leverage and Debt/Equity Ratios are relatively good at 2.77 and 1.49. These also have not always been as good as the 10 year median ratios are 4.53 and 3.29, respectively.

I note that on one site this stock was listed as having a medium or average risk. I would disagree. I think because of the fluctuations in revenue, earnings and cash flow, this stock is of a higher risk level. As an investor of dividend paying stock, what I do not like about this stock is that values (i.e. EPS) fluctuate.

I like companies that can grow well and have somewhat steady growth pattern. Yes, these values decline in recession, but then make a nice steady return to growth. The values under this company fluctuate too much for me to be interested in this stock. It also pays dividends in US$, and this just adds more fluctuations for a Canadian investor.

Brookfield Properties is a leading North American commercial real estate company that invests in premier-quality office properties in high-growth markets driven by financial service, government, and energy tenants. The portfolio is composed of office properties in 12 top U.S. and Canadian markets. Its web site is here Brookfield Office Properties. See my spreadsheet at bpo.htm.

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 for stocks followed and investment notes. Follow me on Twitter or StockTwits.