BPY STOCK: Brookfield Properties Is a High-Dividend Stock
November 9, 2016
Can Investors Benefit From This High-Dividend Stock?
When income investors look for high-dividend stocks, real estate is one of the first sectors that they look towards to satisfy their needs. However, an issue lies in that many real estate companies are not diversified. Typically, companies are only invested in one segment of the real estate sector, such as commercial or hospitality properties. Income investors need to purchase a few different companies to obtain exposure to different segments of real estate.
I have found a company that is globally diversified and owns and operates in many different segments of real estate: Brookfield Property Partners LP (NYSE:BPY). BPY stock could satisfy high-dividend stocks investors and provide the desired diversification as well. Let me explain.
Diversified
Brookfield operates in five different segments in real estate: Traditional Real Estate, Office and Retail, Hospitality, Student Housing, and Alternative Real Estate. The office properties that are owned and managed are first-class properties located in financial districts with nearly zero vacancies, making the company attractive to investors. Cities in Brookfield’s portfolio include New York, London, Berlin, and Sydney. The retail exposure comes from an investment that the company made in General Growth Properties Inc (NYSE:GGP).
Currently, Brookfield owns 34% of GGP stock, which has a market cap of approximately $21.0 billion. GGP operates, develops, and manages over 130 retail properties located across the U.S. With Brookfield having a large stake in GGP, there is always the possibility of purchasing the rest of the company.
The market cap for Brookfield Properties is just shy of $6.0 billion, so if such an acquisition were to take place, help would be needed. Brookfield is very fortunate because it has a parent company, Brookfield Asset Management Inc (NYSE:BAM), which has a market cap of approximately $35.0 billion. At this current moment, 18.15% of the outstanding shares of BPY stock are owned by BAM. I would not be surprised if Brookfield Properties and its parent company made an offer for GGP if the price was attractive from a valuation point of view. (Source: “Brookfield Property Partners LP,” Morningstar, last accessed November 8, 2016.)
The Hospitality, Student Housing, and Alternative Real Estate segments account for 14% of total earnings. The properties tied with these segments include over 300 car dealerships, over 160 self-storage units in North America, 14 student housing properties in the U.K., and 19 hospitality properties in North America, Europe, and Australia. (Source: “Supplemental Information For the quarter ended Septemeber 30,” Brookfield Properties Partners LP, November 2, 2016.)
Dividend and Outlook
Over the last year, shares of BPY stock have been flat. Currently, this high-dividend stock is yielding 5.09% based on the current trading price of $22.00. The dividend growth for the shares has seen an increase of 112%, over the past three years.
The dividend was not the only way that shareholders saw money given back to them. Year-to-date, Brookfield has repurchased approximately 1.1 million shares at an average price of $21.42. When share repurchases are pursued by the company, it is an indicator that the shares are undervalued. (Source: “Brookfield Property Partners Reports Third Quarter 2016 Results,” Brookfield Properties Partners LP, November 2, 2016.)
Analysts are on board with Brookfield and believe the shares are undervalued. All the analysts that have BPY shares and have done their research have it rated as a “buy.” The average price target is $26.63, which would reflect a 21% upside potential. Along with the dividend payment, it would mean an approximate 26% in upside potential. (Source: “Brookfield Property Partners L.P.,” MarketWatch, last accessed November 8, 2016.)
Final Word on BPY Stock
Brookfield Properties is one of my favorite high-dividend stocks. This is a company with unique portfolio assets. With savings accounts returning little or no money back to investors, BPY stock should be one to consider owning based on income and future growth ahead.
