Is it a good company at a reasonable price? This stock price seems reasonable. I prefer companies with lower yields and better dividend increases. It is never good when a company decreases their dividends. Personally, I would not buy at present but wait to see what happens. The spin-off of Primaris Real Estate Investment Trust does not make up for dividend decreases. The stock price went down because of the spin-off, but yield is a lot lower than in the past. The 10 year median yield is 6.13% and current yield is 3.91%.
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 since 2020, the distribution is down by some 62%. They had also cut the distribution on 2009 by some 50%, then grew them again until 2020. Dividends are now lower than they were in 1997. (With spin-off of Primaris Real Estate Investment Trust, dividend cut seems to be around 48%.)
If you had invested in this company in December 2011, $1,000.18 you would have bought 43 shares at $23.26 per share. In December 2021, after 10 years you would have received $534.38 in dividends. The stock would be worth $698.75. Your total return would have been $1,233.13.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $23.26 | $1,000.18 | 43 | 10 | $534.38 | $698.75 | $1,233.13 |
The dividend yields are moderate with dividend growth non-existent. The current dividend yield is moderate (2% to 4% ranges) at 3.91%. The 5, 10 and historical dividend yields are good (5% to 6% ranges) at 6.25%, 6.13% and 6.26%. Dividends were recently decreased in 2020 and then again in 2022. Decrease in dividends is 62%. Dividends are now lower than when they were started in 1997. REIT generally have good yields and low growth. However, the current yield is not in the good category.
If you consider the dividends of the spin-off of Primaris Real Estate Investment Trust (TSX: PMZ.UN) then dividends are only down 48%, not 62%. H & R said that the spin off was worth $5.57 for shareholders of H & R. Shareholders got 1 share of Primaris for each 4 shares of H & R. So Primaris $0.80 dividend is worth $0.20 per share for H & R shareholders or 0.06 per month.
The Dividend Payout Ratios (DPR) are fine, since the important DPRs is for FFO and AFFO. The DPR for EPS for 2021 is 34% with 5 year coverage at 151%. Because this is a REIT, we need to look at DPR for FFO (Funds from Operations). That DPR for 2021 is 45% with 5 year coverage at 69%. We also need to look at the DPR for AFFO (Adjusted Funds from Operations). That DPR for 202157% with 5 year coverage at 87%. The DPR for Free Cash Flow for 2021 is 65% with 5 year coverage at 74%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2021 is good at 0.83. The Liquidity Ratio is low for 2021 at 1.28. This has varied a lot and REITs do not divide the Balance Sheet up with Current and Long Term Categories. The Debt Ratio is good at 1.83. The Leverage and Debt/Equity Ratios are fine at 2.20 and 1.20 respectively.
The Total Return per year is shown below for years of 5 to 25 to the end of 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | -12.59% | -0.28% | -6.19% | 5.92% |
| 2011 | 10 | -3.36% | 2.71% | -3.52% | 6.24% |
| 2006 | 15 | -4.28% | 3.17% | -2.59% | 5.76% |
| 2001 | 20 | -2.58% | 9.11% | 0.82% | 8.29% |
| 1996 | 25 | 0.06% | 11.63% | 1.96% | 9.67% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.16, 12.95 and 13.74. The corresponding 10 year ratios are 14.33, 15.95 and 17.57. The corresponding historical ratios are 12.16, 13.30 and 17.50. The current P/E Ratio is 9.71 based on a stock price of $13.30 and EPS estimate for 2022 of $1.37. The current ratio is below the low the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
Because this is a REIT, we need to look at Price/Funds from Operations Ratios. The 5 year low, median, and high median ratios are 10.91, 11.61 and 12.83. The corresponding 10 year ratios are 10.98, 11.74 and 12.87. The current P/FFO Ratio is 11.37 based on a stock price of $13.30 and FFO estimate for 2022 of $1.17. This ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Because this is a REIT, we need to look at Price/Adjusted Funds from Operations Ratios. The 5 year low, median, and high median ratios are 13.53, 14.40 and 15.53. The corresponding 10 year ratios are 13.51, 14.56 and 16.16. The current P/AFFO Ratio is 12.31 based on a stock price of $13.30 and AFFO estimate for 2022 of $1.08. This ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $20.87. The 10 year low, median, and high median Price/Graham Price Ratios are 0.63, 0.69 and 0.76. The current P/GP Ratio is 0.64 based on a stock price of $13.30. This ratio is between the low and the median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 0.90. The current P/B Ratio is 0.80 based on a stock price of $13.30, Book Value of $4774M and Book Value per Share of $16.55. The current ratio is 11% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 9.91. The current P/CF Ratio is 8.49 based on a stock price of $13.30, Cash Flow for the last 12 months of $452M, and Cash Flow per Share of $1.57. The current ratio is 14% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 6.26%. The current dividend yield is 3.91% based on dividends of $0.5196 and a stock price of $13.30. The current dividend yield is 38% below the historical median ratio. 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 3.91% based on dividends of $0.5196 and a stock price of $13.30. The current dividend yield is 36% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 5.16. The current P/s Ratio is 4.26 based on a stock price of $13.30, Revenue estimate for 2022 of $903M and Revenue per Share of $3.13. The current ratio is 18% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable and below the median. The P/S Ratio test shows this as do a number of the other tests. Some of the tests show the stock price is relatively cheap. Dividend yield tests are not good indicators of stock price when dividends are decreased. However, it is never a good sign when dividends are decreased.
What I said last year that the results of stock price testing was 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.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (3) and Hold (2). The consensus is a Buy. The 12 month stock price consensus is $15.50. This implies a total return of 20.45% with 16.54% from capital gains and 3.91% from dividends.
When I looked at analysts’ recommendations last year, I found 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. What happened was a total loss of 5.43% with a capital loss of 11.80% and dividends of 6.37%. The stock declined because of a spin-off.
There are several entries on Stock Chase for this stock and opinions vary. Christopher Liew on Motley Fool talks about REITs being an alternative to buying real estate. Kay Ng on Motley Fool talks about the why of the stock’s decline. Spin off announced on Newswire of Primaris Real Estate Investment Trust (TSX: PMZ.UN). The company talks about the fourth quarter results via Cision on Yahoo Finance. Simply Wall Street report on Yahoo Finance reviews this stock. Simply Wall Street has 4 risk warnings of earnings are forecast to decline by an average of 31.8% per year for the next 3 years, debt is not well covered by operating cash flow, dividend of 5.23% is not well covered by earnings, and large one-off items impacting financial results. Note that FFO and AFFO is better to judge dividend coverage than earnings.
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 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 Monday, March 21, 2022 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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