Is it a good company at a reasonable price? I bought some REITs for diversification and that is probably a good reason to buy. They also pay monthly dividends and that is good, because if you depend on dividends, some dividend cycles are more used that others. For me the first cycle for dividends (January, April, August and September) has the lowest amount of dividend income. But note that most of the returns for REITs is in dividends. The stock price is certainly reasonable and is probably cheap.
I do not own this stock of H & R Real Estate Trust (TSX-HR.UN, OTC-HRUFF). Results of stock price testing is that the stock price is probably cheap. Before I started blogging, I was following several 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 that this is another REIT that has cut their dividends. Like RioCan, they have also begun again to raise dividends. Dividends went down in 2020, 2021 and 2022. Dividends hit bottom in 2022 and then the rises began. The last raise was in 2023 and the increase was for 9.2%. However, dividends are still down 56% since 2019.
If you had invested in this company in December 2012, for $1,12.20 you would have bought 42 shares at $24.10 per share. In December 2022, after 10 years you would have received $627.64 in dividends. The stock would be worth $508.62. Your total return would have been $1,136.26.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $24.10 | $1,012.20 | 42 | 10 | $627.64 | $508.62 | $1,136.26 |
The dividend yields are moderate with dividend growth restarting. The current dividend yield is moderate (2% to 4% ranges) at 4.72%. The 5, 10 and historical dividend yields are good (5% to 6% ranges) at 6.25%, 6.13% and 6.25%. Dividends were cut 2020 and the company just started to raise them again in 2023. The last dividend increase was in 2023 and it was for 9.2%. The dividends are still 56% lower than they were in 2020.
The Dividend Payout Ratios (DPR) are for FFO and AFFO are currently fine and these are the important ones for REITs. The DPR for 2022 for Funds from Operations (FFO) is 47% with 5 year coverage at 104%. The DPR for FFO for 2023 is expected to be 48%. The DPR for Adjusted Funds from Operations (AFFO) for 2022 is 56% with 5 year coverage at 132%. The DPR for AFFO for 2023 is expected to be 56%.
The DPR for EPS for 2022 if 161% with 5 year coverage at 57%. The DPR for EPS is expected to be 139% in 2023. The DPR for Cash Flow per Share (CFPS) for 2022 is 32% with 5 year coverage at 72%. The DPR for Free Cash Flow (FCF) for 2022 is 120% with 5 year coverage at 83%. The DPR for FCF for 2023 is expected to be around 132%.
Some Debt Ratios need to improve. The Long Term Debt/Market Cap Ratio for 2022 is 1.22 and this is too high. It is still currently too high at 1.16. The Liquidity Ratio for 2022 is 0.89 and is too low. If you add in cash flow after dividends, it is still too low at 1.25. I prefer this to be at least 1.50. The Debt Ratio for 2022 is good at 1.93. The Leverage and Debt/Equity Ratios are fine at 2.08 and 1.08.
The Total Return per year is shown below for years of 5 to 26 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | -16.77% | -1.22% | -10.73% | 9.51% |
| 2012 | 10 | -7.29% | 1.53% | -6.65% | 8.18% |
| 2007 | 15 | -5.89% | 4.64% | -3.24% | 7.88% |
| 2002 | 20 | -3.81% | 9.29% | -0.49% | 9.78% |
| 1997 | 25 | -0.84% | 11.10% | 0.44% | 10.66% |
| 1996 | 26 | 11.51% | -2.11% | 13.62% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 6.02, 6.99 and 7.97. The corresponding 10 year ratios are 14.33, 15.95 and 17.57. The corresponding historical ratios are 12.16, 13.13 and 17.50. The current P/E Ratio is 10.59 based on a stock price of $12.71 and EPS estimate for 2023 of $1.20. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I have Funds from Operations (FFO) data. The 5-year low, median, and high median Price/FFO Ratios are 8.78, 10.51 and 12.31. The corresponding 10 year ratios are 10.60, 11.61 and 12.76. The current P/FFO Ratio is 10.33 based on a stock price of $12.71 and FFO estimate for 2023 of $1.23. The current ratio is below the low of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I have Adjusted Funds from Operations (AFFO) data. The 5-year low, median, and high median Price/AFFO Ratios are 10.42, 12.47, and 15.27. The corresponding 10 year ratios are 13.43, 14.45 and 15.51. The current P/AFFO Ratio is 11.88 based on a stock price of $12.71 and AFFO estimate for 2023 of $1.07. The current ratio is below the low of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $23.90. The 10-year low, median, and high median Price/Graham Price Ratios are 0.61, 0.67 and 0.75. The current P/GP Ratio is 0.53 based on a stock price of $12.71. The current ratio is below the low of the 10 year median ratio. 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 0.88. The current P/B Ratio is 0.62 based on a Book Value of $5,487M, Book Value per Share of $20.64 and a stock price of $12.71. The current ratio is 30% 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 11.22. The current P/CF Ratio is 13.25 based on Cash Flow for the last 12 months of $255M, Cash Flow per Share of $0.96 and a stock price of $12.71. The current ratio is 18% 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 6.25%. The current dividend yield is 4.72% based on dividends of $0.60 and a stock price if $12.71. The current ratio is 24% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 6.13%. The current dividend yield is 4.72% based on dividends of $0.60 and a stock price if $12.71. The current ratio is 223% below 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 5.00. The current P/S Ratio is 3.49 based on Revenue estimate for 2023 of $969M, Revenue per Share of $3.64 and a stock price of $12.71. The current ratio is 30% 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 probably cheap. The P/S Ratio testing says this. The problem with the dividend yield testing is that the dividends were cut and this test works best with dividend growth. The P/FFO Ratio and P/AFFO Ratio testing says that the stock price is cheap and this are good tests for REITs. The non dividend yield tests say the stock is cheap or reasonable.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (2) and Hold (2). The consensus would be a Buy. The 12 months stock price consensus is $15.75. This implies a total return of 28.64% with 23.92% from capital gains and 4.72% from dividends based on a current stock price of $12.71.
The three entries for 2023 on Stock Chase gives this stock a Buy rating. Stock Chase gives this stock 4 stars out of 5. Joey Frenette on Motley Fool Thinks this stock is due for a comeback in 2023. Motley Fool thinks this stock has a safe dividend. The company put out a press release on Newswire about their fourth quarter of 2022 results. Simply Wall Street on Yahoo Sport discusses this stock. Simply Wall Street gives this stock 3 stars out of 5. It names 4 warnings of earnings are forecast to decline by an average of 50.5% per year for the next 3 years; debt is not well covered by operating cash flow; unstable dividend track record; and large one-off items impacting financial results.
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. The REIT has four reportable operating segments- Residential, Industrial, Office and Retail, in two geographical locations -Canada and the United States. The operating segments derive their revenue from rental income from leases. Most of this income is generated by its Canadian properties. 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 20, 2023 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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