H & R Real Estate Trust 2

On my other blog I am today writing about Warrants continue...

I do not own this stock of H & R Real Estate Trust (TSX-HR.UN, OTC- HRUFF). Before I started blogging, I was following a number of REITs and this is one I had followed. It also used to be on a dividend list I followed.

When I look at insider trading, I find $4.3M of insider selling and $0.7M of insider buying with net insider selling at $3.6M. Net insider selling is at 0.06% of market cap and so is relatively low. There is some insider ownership with the CEO owing shares worth around $72M and a director owning shares worth around $26.5M.

The 5 year low, median and high median Price/Earnings per Share Ratios are 11.18, 15.21 and 17.50. The current P/E Ratio is 14.38 based on 2014 EPS estimate of $1.46 and a stock price of $21.00. The stock price test suggests that the stock price is reasonable.

The 5 year low median and high median Price/AFFO Ratios are 13.30, 15.21 and 17.03. The current P/AFFO Ratio is 12.73 based on a stock price of $21.00 and 2014 AFFO estimate of $1.65. The stock price test suggests that the stock price is cheap.

I get a Graham Price of $27.76. The 10 year low, median and high median Price/Graham Price Ratios are 0.91, 1.06 and 1.30. The current P/GP Ratio is 0.76. The stock price test suggests that the stock price is cheap.

I get a 10 year Price/Book Value per Share Ratio of 1.55. The current P/B Ratio is 0.90 based on a BVPS value $23.46 and a stock price of $21.00. The current P/B Ratio is some 42% lower than the 10 year P/B Ratio. The stock price test suggests that the stock price is cheap.

I get a 5 year median dividend yield of 5.97% and the current dividend yield of 6.43% is some 7.7% higher. The stock price test suggests that the stock price is reasonable.

On an historical basis the dividend yield has been much higher. The historical high dividend yield is 11.35%, the historical average dividend yield is 7.94% and the historical median dividend yield is 6.68%. These dividend yields are higher than the current dividend yield of 6.43%, although the historical median dividend yield is not far at a value of 4% higher. If you use the historical median dividend yield, stock price test suggests that the stock price is reasonable.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. The 12 month stock price consensus is $25.40. This implies a total return of 27.38% with 20.95% from capital gains and 6.43% from dividends.

Forbes thinks that this company is in oversold territory according to a recent article. According to Sleek Money Scotiabank has just raised their target price from $24.00 to $24.25. The Digital Journal says that HR had solid results for the third quarter of 2014. An article in the Winnipeg Free Press talks about H & R selling off part of their portfolio to Public Sector Pension Investment Board.

Sound bit for Twitter and StockTwits is: Price is cheap to reasonable. I believe that portfolios should have some Real Estate stock in them. This is a good diversification for any portfolio. What you should expect for real estate stocks, especially REITs is a good dividend yield and increases that are slightly higher than the inflation rate. See my spreadsheet at hr.htm.

This is the second of two parts. The first part was posted on Friday, December 12, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

H&R Real Estate Investment trust 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 across Canada and US. Its web site is here HR REIT.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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