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EdR: An Educated REIT

04/30/2015 8:00 am EST

Focus: REITS

John Dobosz

Editor, Forbes Premium Income Report and Forbes Dividend Investor

One REIT with a compelling dividend yield and modest valuations is a big landlord in college towns around the United States, particularly in the Southeast, explains income expert John Dobosz, editor of the Forbes Dividend Investor.

Memphis, Tenn.-based EdR (EDR), formerly known as Education Realty Trust, was founded in 1964 and is one of the largest owners, developers, and managers of collegiate housing.

The real estate investment trust owns or manages 73 communities with more than 40,000 beds serving 53 universities in 23 states.

Revenue this year is expected to climb 13% to $233.2 million, although earnings per share are expected to decline to $1.79 from $1.86.

Over the past four years, the quarterly dividend has risen from $0.15 per share to the current rate of $0.36, good for a yield on nearly 4.2%. The next $0.36 quarterly dividend will be payable May 15 to shareholders of record as of April 30.

At an enterprise value 21.1 times expected 2015 earnings before interest, taxes, depreciation and amortization, EDR trades at an 18.5% discount to its five-year average enterprise value to EBITDA multiple.

In addition, at 9.8 times free cash flow per share over the past 12 months, EDR sports a 16.5% discount to its five-year average price-to-free cash flow ratio.

One final bit of evidence to burnish the bullish case on EDR, the company’s chief financial officer, Edwin Brewer, Jr., purchased 1,000 shares of EDR at $35.25 back on February 25. While the absolute dollar value of $35,250 is not massive, it is substantial for a guy with a salary last year of $217,000.

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