Higher interest rates have taken a toll on real estate investment trusts. Since May 1, REITs in the iShares Cohen & Steers Realty Majors (ICF) ETF have tumbled 12.4%. Marquee names like Vornado (VNO) and Boston Properties (BXP) have fared a bit better, both down more than 3.5%.
Some smaller outfits have done even better: Great Neck, N.Y.-based One Liberty Properties (OLP) is down just 1.1% in the same time period. Its rising and meaty payout, along with its discounts to historical valuations, make now a decent time to buy OLP.
One Liberty owns a portfolio of 103 properties with 5.7 million square feet in 28 states. Accounting for 80% of the tenants are retail stores like CVS, Walgreen, PetSmart, Havertys Furniture, Office Depot, OfficeMax and Kohl’s, as well as restaurants like Applebee’s and Wendy’s Old Fashioned Hamburgers. Most properties are located in the Eastern U.S., although there are 12 pieces of real estate owned by One Liberty in Texas.
Revenue is expected to climb 8.5% from last year to $45.6 million in 2012. Net income is forecasted to rise 5.4% to $1.68 per unit.
As a REIT, One Liberty must pay at least 90% of net income out as dividends to avoid taxation at the corporate level. Dividends are taxed as ordinary income when received by investors.
The quarterly payout of $0.35 is up from $0.33 last September, and it is well covered by earnings and $2.27 in cash from operations over the past 12 months. OLP has a track record of paying dividends going back to 1992. It did cut the payout in late 2008, but began jacking it higher again in March 2010.
There appears to be good value in One Liberty. Over the past five years, OLP has traded at an average price- earnings multiple of 15.4. Using this year’s forecasted $1.68 in earnings and that 15.4 multiple, you get a price of $25.87.
John Dobosz, Forbes Dividend Investor, August 26, 2013
