H & R Real Estate Trust

Sound bite for Twitter and StockTwits is: Dividend Paying REIT. The stock price is relatively cheap. They decreased their dividend last year. There has been insider buying. An analyst thinks the CEO is overpaid. A good reason to buy a REIT is for diversification. You tend to get high yield and little growth in dividends. 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 insider started to buy when the stock was falling in March of last year at just under $20.00. Buying continued and the last buy was for $13.34.

The dividend yields are moderate with dividend growth currently non-existent. The current dividend yield is moderate (2% to 4% ranges) at 4.58%. The 5, 10 and historical median dividend yield are good (5% and 6% ranges) at 6.26%, 6.13% and 6.36%. This REIT has just reduced their dividends by 50% (in 2020). It has a mixed record when it comes to dividend changes. I have data for 23 years in which there were 17 years of increases and 2 years of decreases. They decreased their dividends by 50% in 2009 and they did not reach the pre-2009 dividend before this cut.

The Dividend Payout Ratios (DPR) are fine. Since there was an earnings loss in 2020, I cannot calculate the DPR or EPS for 2020. The 5 year coverage is 204%. Analysts expect this DPR to improve. The DPR for CFPS for 2020 is 39% with 5 year coverage at 51%. The DPR for Funds from Operations (FFO) for 2020 is 55% with 5 year coverage at 71.57%. The DPR for Adjusted Funds from Operations (AFFO) for 2020 is 72% with 5 year coverage at 91%. The DPR for Free Cash Flow (FCF) for 2020 is 70% with 5 year coverage at 74%. (Sites do not agree on FCF.)

Debt Ratios are fine. The Long Term Debt/Market Cap Ratio is 1.67. If you look at Covering Assets/Long Term Debt Ratio, it is fine at 0.55. (Coverage of Long Term Debt needs to be less than 1.00.) The Liquidity Ratio is fine at 1.45. The Debt Ratio is good at 1.83. The Leverage and Debt/Equity Ratios are fine at 2.20 and 1.20.

The Total Return per year is shown below for years of 5 to 24 to the end of 2020. 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.
2015	5	-7.38%	-0.40%	-7.90%	7.49%
2010	10	1.57%	3.82%	-3.73%	7.55%
2005	15	-2.30%	3.95%	-2.99%	6.94%
2000	20	-0.93%	10.34%	0.53%	9.80%
1996	24	1.32%	11.47%	1.19%	10.28%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 14.51, 16.71 and 18.91. The corresponding 10 year ratios are 14.33, 15.95 and 17.57. The corresponding historical ratios are 12.16, 14.25 and 17.50. The current P/E Ratio is 20.11 based on a stock price of $15.08 and EPS estimate for 2021 of $0.75. The current P/E Ratio is above the 10 year high median ratio of 17.57, this stock price testing suggests that the stock price is relatively expensive.

Since this is a REIT, we need to look also at Price/Fund from Operations Ratio. The 5 year low, median, and high median P/FFO per Share Ratios are 10.91, 11.61 ad 12.83. The corresponding 10 year ratios are 11.16, 11.098 and 13.02. The current P/FFO Ratio is 9.31 based on a stock price of $15.08 and FFO estimate for 2021 of $1.62. The current ratio is between the low and median 10 year median ratios of 10.91 and 11.61. This stock price testing suggests that the stock price is relatively reasonable and below the median.

Since this is a REIT, we need to look also at Price/Adjusted Fund from Operations Ratio. The 5 year low, median, and high median P/AFFO per Share Ratios are 13.53, 14.40 and 15.53. The corresponding 10 year ratios are 13.51. 14.64 and 16.40. The current P/AFFO Ratio is 10.40 based on a stock price of $15.08 and FFO estimate for 2021 of $1.45. The current ratio is below the 10 low year median ratios of 13.51. This stock price testing suggests that the stock price is relatively cheap.

I get a Graham Price of $27.78. The 10 year low, median, and high median Price/Graham Price Ratios are 0.65, 0.70 and 0.76. The current P/GP Ratio is 0.54 based on a stock price of $15.08. The current ratio is lower than the 10 year low median ratio of 0.65. 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 0.91. The current P/B Ratio is 0.71 based on a stock price of $15.08, Book Value of $6,071M, and a Book Value per Share of $21.16. The current ratio is 22% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.

I get a 10 year median Price/Cash Flow per Share Ratio of 9.91. The current ratio is 10.13 based on a Cash Flow of the last 12 months of $427M, Cash Flow per Share of $1.49 and a stock price of $15.08. The current ratio is 2% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get an historical median dividend yield of 6.36%. The current dividend yield is 4.58% based on dividends of $0.69 and a stock price of $15.08. The current dividend is 28% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median dividend yield of 6.13%. The current dividend yield is 4.58% based on dividends of $0.69 and a stock price of $15.08. The current dividend is 25% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.

The 10 year median Price/Sales (Revenue) Ratio is 5.37. The current P/S Ratio is 3.61 based on Revenue estimate for 2021 of $1,197M, Revenue per Share of $4.17 and a stock price of $15.08. The current ratio is 33% below the 10 year median ratio. 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. The P/S Ratio test is showing this stock as relatively cheap. Note that if the dividend had not been cut, the dividend yield tests would show the stock price as relatively cheap. Most other tests are showing the stock as cheap or below the median. The exception is the P/E Ratio tests, but EPS is not considered to be as important the FFO and AFFO.

Is it a good company at a reasonable price? Yes, I believe the stock price is reasonable. I bought some REITs for diversification. They tend to have high yields and little growth.

When I look at analysts’ recommendations, I find Strong Buy (2), Buy (3) and Hold (2). The consensus would be a Buy. The 12 month stock price is $16.04. This implies a total return of 10.94% with 6.37% from capital gains and 4.585 from dividends based on a stock price of $15.08.

The last 3 recommendations on Stock Chase are Do Not Buy, Hold and Sell. Joey Frenette on Motley Fool thinks it is a top buy for a TFSA income stream. The Executive Summary on Simply Wall Street gives this stock 2 stars out of 5 and 3 risks. A writer on Simply Wall says the CEO of this company is being paid higher than the median. Griffin Milks on You Tube talks about this stock.

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. Its web site is here H & R Real Estate Trust.

The last stock I wrote about was about was RioCan Real Estate (TSX-REI.UN, OTC-RIOCF) ... learn more. The next stock I will write about will be Canadian Tire Corp (TSX-CTC.A, OTC-CDNAF) ... learn more on Friday, March 19, 2021 around 5 pm. Tomorrow on my other blog I will write about Barrick Gold .... learn more on Thursday, March 18, 2021 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.

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