Today's print edition has article on reits on page R12. It says 9/30/13 yield on equity reits was 3.83% according to NAREIT.
NRF estimates 46% of 2013 cad will come from equity reit investments. Last dividend annualizes to 80 cents.
46% x 80 cents = 36.8 cents from equity reits @ 3.83% = 9.61 price from equity reit dividend capitalization.
16% comes from mgt fees per nrf 8/2 presentation x 80 = 12.8 cents from mgt fees capitalized at 4% (midpoint yield per nrf) = 3.20 price from mgt co yield.
Mreit = balance (80 - 36.8 - 12.8) = 30.4 cents dividend from mreit operation capitalized at 12% = 2.53 price from mreit dividend capitalization.
9.61+3.20 +2.53 = 15.34 price from sum of fragmented dividend capitalization. 80/15.34 = 5.21% blended yield. Hamo will settle for 6%. 80 cents/6% = 13.33 price.
Anybody can do the calculation on 94 cents 2014 dividend which is 52% equity, 18% mgt fees and 30% mreit operations. If you do, you will wait for the market to understand. 94 at 6% = 15.67, 7% = 13.43. 94 cents will be history a little more than a year from now. 9.35 to 13.43 (7% on historical) = 43.6% increase in price on top of a 10% dividend. I can wait.
Dar I am glad you have retired and have the time to do this kind of analysis. I am now a part owner of a growing vineyard which requires picking, stemming,squeezing, and pushing grapes. Less productive but maybe a bit more fun. Cheers!
We are sorta retired but seem to work every day. At track in early a.m. to check on bloodstock investment. Just picked Limas and tomatoes. Still have flight school college campus which is leased. Always a problem somewhere. But it sure beats being bored. Would be studying stocks but I just put my trust in the book of Dar.
This can be done in shorter form. If the market demands a 5% yield on dividends from cash flows from equity reits and management fees (I estimate 70% for 2014), then 5% x 70% = 3.5%. If mortgage reit cash flow dividends demand 12%, then 12% x 30% = 3.6%. 3.5% + 3.6% = 7.1% blended yield.
80 cents @ 7.1% = 11.27 price.
The nov 2014 dividend will be at least 25 cents which annualizes to 1.00 @ 7.1% = 14.08 price.
No matter how you slice the dividend capitalization cake, once the market properly prices the type of cash flows underlying a growing dividend, NRF is a buy. If the market hasn't learned in a couple of years, Hamo will spin off the low yield businesses as soon as they are big enough. We will end up with:
Northstar Equity Reit
Northstar Management Reit
Northstar Mortgage Reit
The only segment which ain't big enough today is Management (which includes brokerage). Of course, maintaining 3 public companies is a lot more expensive than maintaining one. But if that's what it takes, I'm confident Hamo will do it. A spin off of the equity reit business (which hires nrf to manage it) toward the end of 2014 would not surprise me if the market does not price the cash flows like other equity reits.
Thank you for a Great analysis. While I pay more attention to the dividend one can not ignore price appreciation and total return. I suspect that in a year or so there will be a discussion of what the various "spin-offs" will be valued but until then, I am very content to watch the dividend and the price continue to increase.
Wishing you the best