Sound bite for Twitter and StockTwits is: Dividend Growth REIT. The stock price is relatively cheap. There has been recent buying by directors at under $21.00. DPRs could be improved. Debt Ratio could be improved. See my spreadsheet on H & R Real Estate Trust.
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 was updating my spreadsheet, I noticed insiders have started to buy the stock recently when it went under $21.00. All the recent buys are by directors. Also, this REIT has not done well in capital gains over the past 5 years. Over the past 5 years the total return was 3.78% with a capital loss of 0.59% and dividends of 6.36%.
The dividend yields are usually good but are getting high currently with the market falling and the dividend growth low. The current dividend yields are in the good range (5% and 6% ranges) to high range (7% and above) with the current at 7.79%. The 5, 10 and historical yields are 6.46%, 6.25% and 6.01%. The growth is low (below 8%). See the chart below.
The Dividend Payout Ratios are currently too high and needs to be improved. The DPR for EPS for 2019 are too high at 122% with coverage at 108%. Because this is a REIT, we need to look at The DPR for Funds from Operations (FFO) for 2019 which are fine at 79% with 5 year coverage also at 74%. The DPR for Adjusted Funds from Operations (AFFO) for 2019 is too high at 106% with 5 year coverage better at 94%. The DPR for CFPS for 2019 is 56% with 5 year coverage at 53%. The DPR for Free Cash Flow for 2019 is 94% with 5 year coverage at 71%. The Dividend Coverage Ratio for 2019 is 1.06 with a 5 year ratio at 1.40.
Debt Ratios are fine, but there is room for improvement. The Long Term Debt/Market Cap ratio is too high at 1.05. This will only get worse in the current bear market. The Liquidity Ratio is good currently at 2.84 but it can vary a lot and is not really important for REITs. The Debt Ratio is good at 1.95. The Leverage and Debt/Equity Ratios are fine at 2.06 and 1.06.
The Total Return per year is shown below for years of 5 to 23 to the end of 2019. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 0.44% | 5.78% | -0.59% | 6.36% |
| 2009 | 10 | 6.72% | 10.06% | 3.17% | 6.89% |
| 2004 | 15 | 0.69% | 6.92% | 0.70% | 6.21% |
| 1999 | 20 | 1.12% | 12.85% | 3.60% | 9.25% |
| 1996 | 23 | 3.27% | 12.18% | 3.30% | 8.88% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 17.00, 18.09 and 19.18. The corresponding 10 year ratios are 14.33, 15.96 and 18.21. The corresponding historical ratios are 12.16, 13.19 and 17.50. The current P/E Ratio is 9.96 based on a stock price of $17.72 and 2020 EPS estimate of $1.78. This stock price testing suggests that the stock price is relatively cheap.
Because this is a REIT, we need to look at Funds from Operations (FFO). The 5 year low, median, and high median Price/Funds from Operations are 10.91, 11.61 and 12.83. The corresponding 10 year ratios are 11.31, 12.30 and 13.19. The current P/FFO Ratio is 9.96 based on a stock price of $17.72 and 2020 FFO estimate of $1.78. This stock price testing suggests that the stock price is relatively cheap.
The 5 year low, median, and high median Price/Adjusted Funds from Operations are 13.53, 14.63 and 15.53. The corresponding 10 year ratios are 13.51, 14.87 and 16.40. The current P/AFFO Ratio is 10.80 based on a stock price of $17.72 and 2020 FFO estimate of $1.64. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $31.37. The 10 year low, median, and high median Price/Graham Price Ratios are 0.66, 0.71 and 0.76. The current P/GP Ratio is 0.56 based on a stock price of $17.72. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 0.93. The current P/B Ratio is 0.72 based on a Book Value of $7,044M, Book Value per Share of $24.57, and a stock price of $17.72. The current ratio is some 23% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 6.46%. The current dividend yield is 7.79% based on dividends of $1.38 and a stock price of $17.72. The current yield is 21% above the historical median yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 6.01%. The current dividend yield is 7.79% based on dividends of $1.38 and a stock price of $17.72. The current yield is 30% above the 10 year median yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 5.37. The current P/S Ratio is 4.00 based on 2020 Revenue estimate of $1,270M, Revenue per Share of $4.43 and a stock price of $17.72. The current ratio is 25% below the 10 year median ratio. I get an historical median dividend yield of 6.46%. The current dividend yield is 7.79% based on dividends of $1.38 and a stock price of $17.72. The current yield is 21% above the historical median yield. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is relatively cheap. All the stock price tests are showing this and there is no problem with any of the tests.
Is it a good company at a reasonable price? This stock will probably do well in the longer term, but at the moment I am worried about the debt level and the coverage of the dividends. It would not be my first choice of a REIT at this time. The stock price is cheap.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (4) and Hold (2). The consensus would be a Buy. The 12 month stock price is $24.63. This implies a total return of 46.78% with 39.00% from capital gains and 7.79% from dividends.
See what analysts are saying Stock Chase. There are mixed reviews with some analysts liking it and some not. Nelson Smith on Motley Fool thinks that REITs have been unfairly hard hit recently and now is the time to buy this one. A writer on Simply Wall Street says the earnings are shrinking and dividends are flat and you should give this stock a pass for now. A writer on Simply Wall Street feels negatively about debt levels and coverage. Liza Goodheart on The Enterprise Leader talks about recent purchase by a director.
H&R Real Estate Investment Trust is a real estate investment trust principally involved in the ownership of properties in Canada and the U.S. H&R owns and manages a real estate portfolio rather equally divided between property in the Canadian provinces of Ontario and Alberta and in the U.S. Office buildings located primarily in Ontario comprise the majority of H&R's assets, while shopping centers managed by Primaris Management and other retail facilities also make up a considerable share. Its web site is here H & R Real Estate Trust.
The last stock I wrote about was about was Allied Properties Real Estate Investment Trust (TSX-AP.UN, OTC-APYRF) ... learn more. The next stock I will write about will be Canadian Tire Corp (TSX-CTC.A, OTC-CDNAF) ... learn more on Friday, March 13, 2020 around 5 pm. Tomorrow on my other blog I will write about International Investing.... learn more on Thursday, March 12, 2020 around 5 pm.
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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
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