The difficulty when analysing INTU, which applies to most property companies, is how to take account of non-cash items that impact reported earnings. The biggest non-cash item that impacts property companies occurs when the property portfolio is revalued up or down.
The revaluation of property assets up increases reported earnings by the value of the increase in the property values. A revaluation down decreases reported earnings. However, in both cases the rental income is rarely impacted.
Real Estate Investment Trusts or REITs must pay out 90% of its rental income to keep a REIT’s tax advantages. This means that reported earnings may be of little or no relevance to owners of the common stock especially for long term owners who are primarily interested in the dividend income. So, if you are an income investor reported earnings are not necessarily a good measure of how cheap or expensive a REIT might be. In most instances adjusted earnings are a better measure of cheapness for value investors. The paid for report contains analysis of price against reported earnings and adjusted earnings to aid the investment decision for value investors.
Just a quick side note is that UK investors who own REIT shares through an ISA or a pension receive the REIT dividends free of personal tax and the dividends are paid from the REIT without corporation tax, which makes accepting income from REITs in ISA’s or pensions for UK tax residents very attractive.
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