Is it a good company at a reasonable price? First, a lot of real estate companies are currently having problems and it will probably take a while for things to turn around. In the meantime, some REITs like this one is offering a very good yield. Since distributions are growing again, it would seem like the distributions are probably safe. The stock price is probably cheap as most of the testing is pointing that way.
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 that this company has not been doing well lately, and it is not currently well followed as I was having a hard time getting estimates for 2024 and 2025. The only growth expected in the next 12 months is for Net Income to grow 433%, but since it collapsed 97% in 2023, it is still not that great.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | -28.00% | -6.36% |
| 5 | AFFO Growth | -20.98% | -4.60% |
| 5 | Net Income Growth | -81.74% | -28.83% |
| 5 | Cash Flow Growth | -36.25% | -8.61% |
| 5 | Dividend Growth | -56.83% | -15.46% |
| 5 | Stock Price Growth | -52.06% | -13.67% |
| 10 | Revenue Growth | -25.49% | -2.90% |
| 10 | AFFO Growth | -23.90% | -2.69% |
| 10 | Net Income Growth | -80.94% | -15.27% |
| 10 | Cash Flow Growth | -52.28% | -7.13% |
| 10 | Dividend Growth | -55.87% | -7.85% |
| 10 | Stock Price Growth | -53.74% | -7.42% |
If you had invested in this company in December 2013, for $1,005.80 you would have bought 47 shares at $21.40 per share. In December 2023, after 10 years you would have received $707.80 in dividends. The stock would be worth $465.30. Your total return would have been $1,173.10. This would be a total return of 2.13% per year with 7.42% from capital loss and 9.55% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $21.40 | $1,005.80 | 47 | 10 | $707.80 | $465.30 | $1,173.10 |
The current dividend yield is good with dividend growth restarting after a dividend cut. The current dividends yield is good (5% to 6% ranges) at 6.91%. The 5, 10 and historical dividend yields are also good at 5.48%, 6.13% and 6.25%. Dividends were cut in 2020 and the company started to raise them again in 2023. The last dividend increase was in 2023 and it was for 9.2%. The dividend is still 56% below the dividends of 2019. This dividends on REITs are generally called Distributions.
The important Dividend Payout Ratios (DPR) for AFFO and FFO are current fine, but were recently too high. The DPR for 2023 for Earnings per Share (EPS) is high at 272% with 5 year coverage at 198%, but the important DPRs are those for AFFO and FFO. The DPR for 2023 for Adjusted Funds from Operations (AFFO) is good at 54% with 5 year coverage too high at 140%. The DPR for 2023 for Funds from Operations (FFO) is good at 45% with 5 year coverage too high at 111%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 32% with 5 year coverage high at 78%. The DPR for 2023 for Free Cash Flow (FCF) is high at 57% with 5 year coverage high at 74%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 272.18% | 198.28% |
| AFFO | 53.63% | 140.02% |
| FFO | 44.97% | 110.97% |
| CFPS | 32.74% | 77.74% |
| FCF | 67.42% | 74.02% |
Debt Ratios are mostly fine, but debt is high. The Long Term Debt/Market Cap Ratio for 2023 is too high at 1.42 and currently at 1.62. The Liquidity Ratio for 2023 is too low at 1.17. If you added in Cash Flow after dividends, the ratios are fine at 1.64. The Debt Ratio for 2023 is good at 1.93. The Leverage and Debt/Equity Ratios for 2023 are fine at 2.08 and 1.08.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 1.42 | 1.62 |
| Intang/GW | 0.00 | 0.00 |
| Liquidity | 1.17 | 1.17 |
| Liq. + CF | 1.64 | 1.64 |
| Debt Ratio | 1.93 | 1.93 |
| Leverage | 2.08 | 2.08 |
| D/E Ratio | 1.08 | 1.08 |
The Total Return per year is shown below for years of 5 to 27 to the end of 2023. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | -4.16% | -3.11% | -13.67% | 10.56% |
| 2013 | 10 | -1.89% | 2.13% | -7.42% | 9.55% |
| 2008 | 15 | -1.69% | 16.18% | 1.91% | 14.26% |
| 2003 | 20 | -0.46% | 7.18% | -2.34% | 9.52% |
| 1998 | 25 | 0.32% | 11.86% | -0.12% | 11.98% |
| 1996 | 27 | 1.92% | 11.38% | -4.30% | 15.69% |
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 12.92, 13.30 and 18.91. The current P/E Ratio is 7.48 based on a stock price of $8.68 and EPS estimate for 2024 of $1.16. This 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 (AFFO) data. The 5-year low, median, and high median Price/ Funds from Operations Ratios are 7.87, 9.14 and 12.23. The corresponding 10 year ratios are 9.93, 11.27 and 12.60. The current P/FFO Ratio is 7.48 based on a stock price of $8.68 and FFO estimate for 2024 of $1.16. 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 Adjusted Funds from Operations (AFFO) data. The 5-year low, median, and high median Price/ Funds from Operations Ratios are 9.93, 11.55 and 14.52. The corresponding 10 year ratios are 12.63, 13.99 and 15.50. The current P/AFFO Ratio is 8.77 based on a stock price of $8.68 and AFFO estimate for 2024 of $0.99. 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 get a Graham Price of $22.75. The 10-year low, median, and high median Price/Graham Price Ratios are 0.58, 0.65 and 0.74. The current P/GP Ratio is 0.38 based on a stock price of $8.68. 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 get a 10-year median Price/Book Value per Share Ratio of 0.85. The current P/B Ratio is 0.44 based on a stock price of $8.68, Book Value of $5,192M and Book Value per Share of $19.83. The current ratio is 49% below the 10 year median ratio. 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 get a 10-year median Price/Cash Flow per Share Ratio of 11.18. The current P/CF Ratio is 7.71 based on Cash Flow for the last 12 months of $295M, Cash Flow per Share of $1.13 and a stock price of $8.68. The current ratio is 31% below the 10 year median ratio. 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 get an historical median dividend yield of 6.25%. The current dividend yield is 6.91% based on Dividends of $0.60 and a stock price of $8.68. The current yield is 11% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 6.13%. The current dividend yield is 6.91% based on Dividends of $0.60 and a stock price of $8.68. The current yield is 13% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10-year median Price/Sales (Revenue) Ratio is 4.95. The current P/S Ratio is 2.45 based on a stock price of $8.68, Revenue estimate for 2024 of $927M and Revenue per Share of $3.54. The current P/S Ratio is 50% 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 reasonable and may be even cheap. The dividend yield testing is showing the stock price as reasonable. However, these tests work best on stocks when dividends are growing and dividends were recently cut and then started on this stock. The P/S Ratio testing is saying that the stock price is cheap. The rest of the stock price testing is saying that the stock price is cheap.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (1) and Hold (3). The consensus would be a Buy. The 12 month stock price consensus is $11.00, with a high of $11.50 and low of $10.50. The consensus stock price of $11.00 implies a total return of 33.64% with 26.73% from capital gains and 6.91% from dividends.
The analysts’ recommendations on Stock Chase gives for 2023, 3 Buys, 1 Do Not Buy and 1 Hold. Stock Chase gives this stock 3 stars out of 5. Christopher Liew on Motley Fool says you can get great month income investing in this stock. Christopher Liew on Motley Fool says invest for its hefty yield and monthly payouts. The company put out a press release on Newswire about their fourth quarter of 2023.
Simply Wall Street via Yahoo Finance reports on this stock. They list 4 warnings of interest payments are not well covered by earnings; unstable dividend track record; large one-off items impacting financial results; and profit margins (6.8%) are lower than last year (95.3%). Simply Wall Street gives this stock 2 and one half stars out of 5.
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. The majority 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 18, 2024 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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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