Outside of my window, a snowy blizzard is well underway. Inside my head, there's an equally messy situation, as I try to decide between Emera Inc. and H&R Real Estate Investment Trust for my December investment dollars.
Emera got picked up on my stock screen for companies with dividend yields over 3% (current yield = 4.1%) and average dividend growth in the past 3 years of over 10% (right at 10% per year average). The latest payout ratio is at 66%, which while high, seems maintainable for this utility company. Emera has been aggressively investing in capital projects over the last 3 years (funded by CFO and long-term debt), which should position them well for future growth. Management has been able to generate the revenue growth I like to see, but at a decreasing rate over the last 7 quarters.
I've owned H&R before, and was looking to get back in given my other real estate holdings (Riocan and Dundee) seem pretty expensive at the moment, and have not announced any meaningful distribution increases in the last year. H&R currently has a distribution yield of 5.2%, which will increase in January (to 5.6% at the current price level) since the company recently announced a distribution increase. Their 3 year average distribution growth rate is 22%. Their property portfolio is concentrated in office buildings, but also includes a nice chunk of industrial and retail properties. I'm further impressed by their solid list of tenants, including some companies who I have already invested in.
Based on the above comparison, I've decided my December investment dollars go to H&R. I'll try to wait for a dip in the price to buy the shares, but am comfortable getting in at the $24.00 a share price H&R traded at on Friday.