Investing

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

There are a wide variety of REITs involved in non-residential property ownership and management and a few of these are our focus today. These include general office space, technology company office space, buildings leased to government, retail stores, mall buildings, commericial real estate, and movie complexes.
 
The companies included in today’s report include Government Properties Income Trust (NYSE: GOV), Corporate Office Properties Trust (NYSE: OFC), Entertainment Properties Trust (NYSE: EPR), Duke Realty Corp. (NYSE: DRE), Regency Centers Corp. (NYSE: REG), Kimco Realty Corp. (NYSE: KIM), Digital Realty Trust, Inc. (NYSE: DLR), Vornado Realty Trust (NYSE: VNO), Simon Property Group Inc. (NYSE: SPG), and DDR Corp. (NYSE: 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.