Dividend Analysis: Commercial REITs With Most Upside (GOV, OFC, EPR, DRE, REG, KIM, DLR, VNO, SPG, DDR)

All data from Yahoo! Finance, and current prices gathered shortly after noon today.

Government Properties Income Trust (NYSE: GOV) has a median target price of $23.00 from 6 brokers. Shares are trading today at $21.42, for an implied gain of $1.58, or 7.4%. Government Properties’ forward P/E is 10.71 and the company pays a dividend yield of 7.9%. The stock’s 52-week trading range is $19.68-$27.80, and at today’s price that’s about 9% above its 52-week low and 23% below the 52-week high.

Although the company’s implied upside is not among the highest in this group, its list-leading dividend yield and the space between its current price and its 52-week high recommend the stock. One possible downside remains the looming federal budget reduction, which could seriously weigh on the stock.

Corporate Office Properties Trust (NYSE: OFC) has a median target price of $25.50 from 10 brokers. Shares are trading today at $22.83, for an implied gain of $2.67, or 11.7%. Corporate Office’s forward P/E is 31.3 and the company pays a dividend yield of 7%. The stock’s 52-week trading range is $19.65-$36.90, and at today’s price that’s about 16% above its 52-week low and 38% below the 52-week high.

The high forward P/E ratio and the distance between the current price and the 52-week high should lower the stock’s implied gain of nearly 12%. The substantial dividend yield makes up for a lot of sins though.

Entertainment Properties Trust (NYSE: EPR) has a median target price of $46.00 from 7 brokers. Shares are trading today at $44.11, for an implied gain of $1.89, or 4.3%. Entertainment Properties’ forward P/E is 12.45 and the company pays a dividend yield of 6.2%. The stock’s 52-week trading range is $35.71-$50.44, and at today’s price that’s about 24% above its 52-week low and 13% below the 52-week high.

The company reported an EPS of $0.80 in its third quarter, the first positive report this year. That coupled with earnings growth in the current quarter have pushed the stock near its 52-week high, with the lowest implied gain of any of these companies. The dividend yield is certainly attractive, though.

Duke Realty Corp. (NYSE: DRE) has a median target price of $14.00 from 13 brokers. Shares are trading today at $11.50, for an implied gain of $2.50, or 21.7%. Duke’s forward P/E is 10.48 and the company pays a dividend yield of 5.8%. The stock’s 52-week trading range is $9.29-$15.63, and at today’s price that’s about 24% above its 52-week low and 26% below the 52-week high.

At today’s price, Duke’s dividend yield and its implied gain are very attractive, particularly when coupled with a moderate forward P/E and a reasonable amount of space to its 52-week high.

Regency Centers Corp. (NYSE: REG) has a median target price of $40.00 from 14 brokers. Shares are trading today at $37.21, for an implied gain of $2.79, or 7.5%. Regency’s forward P/E is 14.7 and the company pays a dividend yield of 4.8%. The stock’s 52-week trading range is $32.30-$47.90, and at today’s price that’s about 15% above its 52-week low and 22% below the 52-week high.

Regency focuses on retail shopping centers anchored by a large grocery store. The implied upside here is relatively modest, especially given the forward P/E and the  stock’s relatively narrow trading range. Still, people do have to eat and they do have to buy their groceries somewhere.

Kimco Realty Corp. (NYSE: KIM) has a median target price of $18.75 from 16 brokers. Shares are trading today at $16.05, for an implied gain of $2.70, or 16.8%. Kimco’s forward P/E is 12.86 and the company pays a dividend yield of 4.7%.

The stock’s 52-week trading range is $13.55-$20.31, and at today’s price that’s about 18% above its 52-week low and 21% below the 52-week high. The company just boosted its annual dividend by about 5.5% and its implied gain is well within reach, especially given the gap between its current price and its 52-week high.

Digital Realty Trust, Inc. (NYSE: DLR) has a median target price of $66.50 from 16 brokers. Shares are trading today at $63.36, for an implied gain of $3.14, or 5%. Digital’s forward P/E is 14.39 and the company pays a dividend yield of 4.2%. The stock’s 52-week trading range is $47.42-$65.01, and at today’s price that’s about 34% above its 52-week low and 3% below the 52-week high.

Digital Realty looks to be fairly valued at this moment. It’s implied gain is second-lowest on our list, and the stock trades very close to a 52-week high.

Vornado Realty Trust (NYSE: VNO) has a median target price of $88.00 from 13 brokers. Shares are trading today at $78.53, for an implied gain of $9.47, or 12.1%. Vornado’s forward P/E is 14.33 and the company pays a dividend yield of 3.3%. The stock’s 52-week trading range is $68.39-$98.77, and at today’s price that’s about 15% above its 52-week low and 20% below the 52-week high.

Vornado’s target price is about 11% below its 52-week high, which means that the implied gain is dubious, at best. The company’s dividend yield is among the lowest of this group, and there are better choices for investors looking for a REIT.

Simon Property Group Inc. (NYSE: SPG) has a median target price of $133.00 from 18 brokers. Shares are trading today at $125.43, for an implied gain of $7.57, or 6%. Simon’s forward P/E is 17.28 and the company pays a dividend yield of 2.8%. The stock’s 52-week trading range is $94.30-$131.21, and at today’s price that’s about 33% above its 52-week low and 4% below the 52-week high.

Shares are trading very near Simon’s 52-week high, and the low implied gain and relatively high forward P/E indicate that there’s little headroom here. The dividend yield is also low for this group.

DDR Corp. (NYSE: DDR) has a median target price of $14.50 from 12 brokers. Shares are trading today at $11.75, for an implied gain of $2.75, or 23.4%. DDR’s forward P/E is 11.29 and the company pays a dividend yield of 2%. The stock’s 52-week trading range is $9.76-$15.28, and at today’s price that’s about 20% above its 52-week low and 23% below the 52-week high.

DDR, like Kimco, boosted its dividend for the fourth quarter, but still pays a scant 2% yield. The implied gain is highest of any stock in this group, but the target price is still shy of its 52-week high and there’s not much reason to believe that the stock will move out of its current narrow trading range.

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Of this group, Duke and Kimco appear to offer the best opportunity on the surface. Both boast substantial implied gains and both have room to run toward 52-week highs. Dividend yields for these two are above 4.5%. Office Properties’ target price is higher than its 52-week high, which could indicate that analysts are bullish on the stock or that they simply haven’t gotten around to re-evaluating the stock. The latter is more likely. The others are down from highs, targets have been lowered, and the implied gains don’t accurately reflect overall value.

Paul Ausick