H & R Real Estate Trust

H & R Real Estate Trust

I do not own this stock (TSX-HR.UN, OTC-HRUFF). I follow a number of REITs and this stock is one that I follow. H&R Real Estate was having trouble in 2009 and decreased their dividend by 50%. They have been increasing their dividends ever since and the current one is now $1.25 per share. However, the dividends are still below those of 2008, which were $1.44 per share. The company was taken off the dividend lists I followed because of the dividend decrease in 2009.

Since decreasing the dividends in 2009, the company has been increasing the dividend several times each year. The latest increase was in October 2012 and the increase was for 4.2%. So far in 2012 the dividends have been increased by 19.1%. The dividends are down by 6.1% per year over the past 5 years and down by 1.8% per year over the past 10 years.

There was two years of earnings losses over the past 5 years, so dividend payout ratios for earnings make no sense. Except for 2009, the company is paying a lot more than earnings in distributions. The 5 year median DPR for cash flow was 47% and this is fine. The 5 year median DPR for Funds from Operations (FFO) was 61.5% and the 4 year median DPR for Adjusted Funds from Operations (AFFO) was 67%.

Well, at least investors have earned money on investing in the stock over the past 5 and 10 years. The total return on this stock is 3.8% per year and 12.48% per year over these periods. The dividend portion of these returns was 4.5% per year and 7.12% per year, respectively. Over the past 5 years there was a capital loss of 0.7% per year. Over the past 10 years, there was a capital gain of 5.36% per year.

One of the problems you get is that not everyone calculates FFO and AFFO in the same way. I looked at an analyst said that the 2011 FFO and AFFO for this stock were $1.60 and $1.36. The company said the 2011 FFO and AFFO were $1.70 and $1.49. Also what was originally called Distributable cash has morphed into FFO. Another problem is Distributable Cash and FFO calculations have changed over the years.

The outstanding shares have increased by 8% and 9.5% per year over the past 5 and 10 years. The increase for 2010 was only 1.6% with increase for the DRIP plan, conversion of Convertible Debentures and options exercised. For 2011, outstanding shares increased by 18.09% with 1.18% increase from DRIP plan, with 15.67% increase due to new share issues, with 1.02% increase because of conversion of convertible debentures and with 0.21% increase due to options being exercised.

Revenue is up by 4.4% and 11.9% per year over the past 5 and 10 years. Revenue per Share is down by 0.1% per year over the past 5 years and up by 3.92% per year over the past 10 years.

Since the Earnings per Share was negative in the financial year ending in 2011, you cannot calculate a growth rate. However analysts expect the EPS for 2012 to be positive this year. A problem is that sites are giving estimates for EPS which are really estimates, most of the time for FFO or AFFO. The FFO per Share was up by 2.7% per year and 2.4% per year over the past 5 and 10 years. The AFFO was down by 0.4% per year over the past 3 years.

Cash flow has done better with CFPS up by7.3% per year and 7.8% per year over the past 5 and 10 years. Book Value per Share growth is little coming in at a growth of just 2.2% and 2.3% per year over the past 5 and 10 years, respectively.

The Return on Equity was negative for 2011 because of the lack of earnings. It was -1.1%. The ROE on comprehensive income was similar at -1%. The ROE has been better but the 5 year median ROE is just 5.7%.

As far as the Liquidity ratios goes, I get a current one of 1.53. However, I should mention that not everyone agrees on what are current assets and current liabilities for this ratio. These assets are not separated in the financial statements. Generally speaking, the cash flow is strong for this stock. (Strong cash flow can make up for a low Liquidity Ratio.)

The Debt Ratio is a bit low at a current ratio of just 1.45. This ratio is generally low. I would prefer it to be at or above 1.50. The current Leverage and Debt/Equity Ratios are a bit high at 3.23 and 2.23, but this is generally what these ratios are for this company. (The 5 year median ratios are 3.27 and 2.24, respectively.)

The taxation on this stock is generally good with a large portion being return of capital. The average Return of Capital each year over the past 10 years is 45% of the distributions. (Of course, sometimes, return of capital is really return of capital.)

Maybe I am old fashion, but I like companies that have earnings. Earnings say a company is profitable. Some REITs actually have earnings.

They have a portfolio of office properties, single-tenant industrial properties, retail properties and development projects. They operate across Canada and US. Its web site is here H&R. See my spreadsheet at hr.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.