Company Description: Urstadt Biddle Properties is a real estate investment trust that acquires, owns and manages commercial real estate properties primarily in the northeastern United States.
Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:
1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number
UBA is trading at a premium to all four valuations above. The stock is trading at a 27.3% premium to its calculated fair value of $14.65. UBA did not earn any Stars in this section.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%
UBA earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. UBA earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1969 and has increased its dividend payments for 18 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
1. NPV MMA Diff.
2. Years to > MMA
The NPV MMA Diff. of the $1,109 is below the $1,700 target I look for in a stock that has increased dividends as long as UBA has. The stock's current yield of 5.31% exceeds the 2.42% estimated 20-year average MMA rate.
Memberships and Peers: UBA is and a member of the Broad Dividend Achievers™ Index. The company's peer group includes: Acadia Realty Trust (AKR) with a 2.9% yield, Glimcher Realty Trust (GRT) with a 3.7% yield and Vornado Realty Trust (VNO) with a 3.7% yield.
Conclusion: UBA did not earn any Stars in the Fair Value section, earned three Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of three Stars. This quantitatively ranks UBA as a 3-Star Hold stock.
Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $15.39 before ADP's NPV MMA Differential increased to the $1,700 minimum that I look for in a stock with 18 years of consecutive dividend increases. At that price the stock would yield 6.4%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $1,700 NPV MMA Differential, the calculated rate is 3.0%. This dividend growth rate is higher than the 1.0% used in this analysis, thus providing no margin of safety. UBA has a risk rating of 2.00 which classifies it as a Medium risk stock.
UBA is in a strong financial position compared to most REITs. It's TTM Free Cash Flow payout is at 56%, which is extremely low for a REIT. In addition, its Debt to Total Capital of 13% is well below the average REITs. It yield of 5.3% is appealing for the yield starved investor. However, it is currently trading well in excess of its calculated fair value of $14.65. Due to its valuation, it is not a candidate for my Dividend Growth Portfolio.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I was long in UBA (4.3% of my High Yield Portfolio). See a list of all my dividend growth holdings here.
Related Articles:
- Becton, Dickinson and Co. (BDX) Dividend Stock Analysis
- Coca-Cola Company (KO) Dividend Stock Analysis
- Meredith Corp. (MDP) Dividend Stock Analysis
- Johnson & Johnson (JNJ) Dividend Stock Analysis
- More Stock Analysis
Tags: [UBA] [AKR] [GRT] [VNO]
