Tuesday, October 4, 2011

Brookfield Office Properties High Yield

Today’s stock is a real estate company that has a really high yield. The company is very active in the commercial real estate industry owning lots of properties in high rent markets like New York, Boston, and Washington D.C. The commercial real estate company was founded in 1923 and has more than $20 billion dollars in assets. The firm recently added to its holding acquiring GMAC Real Estate in 2008. The company in question is Brookfield Office Properties (BPO).

Brookfield Office Properties is one of those high yielding real estate companies out there. The stock is currently selling at its 52 week low of $13 per share. As with most real estate companies, Brookfield Office trades at a value that is significantly higher than its current earnings growth. Shares are trading at 13 times the current year’s earnings and 13 times next year’s earnings. That is much higher than the sub 3% growth expected next year. Shares are not expensive at a price to book ratio of 0.8.

Brookfield has been largely attractive to investors because of the amount of free cash flow that the company generates. Last year the company generated $192 million in cash flow from operations and $19 million dollars in free cash flow. The company’s free cash flow dipped substantially over the first half of the year. Free cash flow was down $24 million dollars from operations and free cash flow was down $222 million dollars due to capital expenditures.

The company is currently yielding 4.1% on a dividend of 57 cents per share. Brookfield Office is paying out less than 50% of this year’s earnings estimates so there is room for a dividend increase. Brookfield has been relatively stable having paid a dividend for 15 consecutive years.

Investors should keep in mind that the company does face uncertainty as the company has more than $8 billion dollars in long term debt. The company relies heavily on access to credit to restructure its debt and could be vulnerable to a credit crunch if the economy enters another recession.


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