Please ensure Javascript is enabled for purposes of website accessibility

Should You Buy Hammerson Today?

By Royston Wild - Apr 16, 2013 at 9:58AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

How attractive are the shares of Hammerson?

LONDON -- I believe that real-estate investment trust (REIT) Hammerson's (HMSO 2.31%) 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.

Bolster your investment income with the Fool
If you already hold shares in Hammerson, and are looking for more FTSE 100 winners to really jump start your investment income, then you should check out this brand-new and exclusive report covering a multitude of other premium payers right now.

Our "5 Dividend Winners to Retire On" wealth report highlights a selection of tasty stocks with an excellent record of providing juicy shareholder returns. Among our picks are top retail, pharmaceutical and utilities plays which we are convinced should continue to provide red-hot dividends. Click here to download the report -- it's 100% free and comes with no obligation.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Hammerson plc Stock Quote
Hammerson plc
$27.85 (2.31%) $0.63

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.