Should You Buy Hammerson Today?

LONDON -- I believe that real-estate investment trust (REIT) Hammerson's (LSE: HMSO  )  ability to keep growing despite enduring weakness in the U.K. retail space makes it an attractive stock selection, particularly for income investors. The firm continues to rebuild its dividend policy after weakness in recent years, and I expect further earnings growth to underpin juicy shareholder payouts in the future.

An attractive dividend deliverer
As one would expect with a REIT, Hammerson offers investors great investment income opportunities. After cutting its dividend heavily in 2009, to 15.5 pence from 27.9 pence as earnings plummeted, Hammerson has gradually hiked payouts since -- the company increased its final dividend 7.5% in 2012 to 10 pence, taking the total dividend to 17.7 pence versus 16.6 pence in 2011.

And brokers expect shareholder payouts to keep rolling, with a dividend of 18.8 pence and 20.1 pence forecast for 2013 and 2014 respectively. These dividends carry yields of 3.6% and 3.9%, ahead of the current forward yield of 3.3% for the FTSE 100.

The requirement for these entities to distribute nine-tenths of their income to shareholders means that Hammerson boasts low dividend coverage of 1.2 times for the next two years, meaning that stakeholder payments could come under pressure in the event of fresh earnings weakness. But I am confident that the company's proven management skills should continue to deliver growth, even in the event of sustained weakness in the British retail arena.

Earnings ready to trudge higher
Hammerson announced at the beginning of March that, despite ongoing trouble in the U.K. retail environment, the firm saw occupancy rates rise during the fourth quarter of the year, coming in above targets at 97.7% as of the end of December. Tenants in administration also came in at a relatively low 2.3%.

As well, the company saw net asset value rise 2.3% last year to 542 pence. Hammerson announced last year plans to vacate the office sector and concentrate on retail assets, ploughing 541 million pounds into new retail investments. This included the purchase of the Junction Fund portfolio -- which consists of four retail parks -- in October for 254 million pounds, and which has already risen in value to the tune of around 10%.

City analysts expect earnings per share to advance 6% in 2013 to 22 pence, before rising a further 9% in the following 12 months to 24 pence. Hammerson currently changes hands on a P/E ratio of 23.4 and 21.4 for 2013 and 2014 respectively, delivering a tasty discount to a forward earnings multiple of 24.5 for the entire REITS sector.

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