HRPT Properties Trust: An Undervalued Commercial REIT

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 |  About: HRPT Properties Trust (HRP)
by: The Div Guy

I recently added a Real Estate Investment Trust [REIT] to my dividend portfolio. I made a small purchase of HRPT Properties Trust (NYSE: HRP) in my brokerage account. I first came across HRP on the list of NYSE 52 week lows and they hit their low for the year on June 26th of $10.13. The stock is down about 20% from its high for the year in February of $13.67.

HRP owns and leases commercial and industrial properties across the US and leased industrial land in Hawaii. HRP was hurt by lower investment gains and higher financing costs than the previous year in their most recent quarterly report. Their occupancy rates have stayed high and rental rates on renewed leases continues to rise.

I like HRP because it is trading at a 20% discount from the yearly high, the stock is currently paying an 8% dividend yield and has paid dividends since 1987. Also a recent Wall Street Journal story reported US office rents increased 3.1% for the second quarter of 2007 due to limited space and strong economic fundamentals in most major markets. This confirms HRP statements of higher lease renewal rates.

A couple of negatives are dividend taxation and lack of yearly dividend increases. REIT dividends are mostly taxed at ordinary tax rates instead of the 15% rate for most stocks. Also HRP has had only a couple of dividend increases over the past 5 years.

Disclosure: Author has a long position in HRP

HRP 1-yr chart

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