The main content for this article first appeared as 1 of 9 top Canadian dividend ideas for December 2017 in the Seeking Alpha Marketplace service DGI Across North America.
Brookfield Property Partners LP (TSX:BPY.UN)(NYSE:BPY) is a reasonably-priced stock in a fully-valued market. Now is an excellent opportunity to buy Brookfield Property (below ~CAD$28 per unit on the Toronto Stock Exchange and at ~US$22 on the New York Stock Exchange) for income.
Brookfield Property owns and operates a global portfolio of real estate assets with a focus in North America. It has ~US$152 billion of assets under management, of which ~73% are in North America. Nearly 17% are in the United Kingdom and Europe, ~8% are in Australia and Asia, and <2% are in Brazil. It has 30 offices, around the globe, where it has ~250 investment professionals and ~16,000 operating employees to get the job done.
About 80% of its portfolio is in core office and retail assets, which targets total returns of 10-12%. The remainder of the portfolio is in opportunistic investments, which target higher returns of 18-20%.
The core portfolio focuses on generating stable cash flows, which help with paying its +5% yield. The opportunistic portfolio aims to invest in mispriced properties in multifamily, industrial, hospitality, triple net lease, self-storage, student housing, and manufactured housing sectors.
Why The Stock Dipped
The stock was depressed from the news of it intending to buy the rest of GGP Inc. (NYSE:GGP) in November. The company hasn’t come out with any news since. The dip in the shares may be that the market thinks the company might need to make a higher bid for GGP.
The Income Opportunity
The shares saw some recovery from the dip in the last week of December. So, certainly, some investors in the market find the income stock to be attractive. The stock yields ~5.3% on Friday’s market close.
The last few years of trading history indicates that a ~5.5% yield is a decent buy for the dividend-growth stock. With the stock going to hike its distribution in Q1, it’s really a good time to buy. Assuming a conservative 5% distribution hike (management aims to hike its dividend by 5-8% per year), the recent quotation implies a forward yield of ~5.6%.
Who knows? If/when Brookfield Property acquires GGP successfully, BPY stock may pop. As value investors, the management will strive to pay a reasonable price on GGP. So, I’m not worried the management will overpay for the acquisition.
If you like what you've just read, consider subscribing via the "Subscribe Here" form at the top right so that you will receive an email notification when I publish a new article.Disclosure: At the time of writing, I’m long TSX:BPY.UN.
Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.
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