DDR is a real estate investment trust (REIT) in the business of acquiring, owning, developing, and managing shopping centers in the U.S.
|Most recent||Growth rate (CAGR)|
|1 year||5 years||10 years|
|Book value of equity per share||$6.07||-19.5%||-6.6%||-11.2%|
|BV including aggregate dividends||-9.4%||2.1%||-4.8%|
|1 year||5 years||10 years|
|Most recent||Growth rate (CAGR)|
|1 year||5 years||10 years|
|1 year||5 years||10 years|
A company creates wealth for its long-term shareholders in 2 main ways - through dividend payments and through the accumulation of retained earnings. This graph shows the accumulation of per-share equity of long-term shareholders (green bars), which consists of the retained earnings plus all capital invested in the company, and the cumulative dividends the company has paid over time per share of its stock (blue bars).
In the words of Warren Buffett: "We're looking for... businesses earning good returns on equity while employing little or no debt."
Return on equity is a key metric of financial performance, indicating a company's ability to generate earnings using shareholder capital. Over time, ROE is one of the major determinants of the rate at which a company creates shareholder wealth. The average ROE for large U.S. companies is 12%, and many investors use it as a threshold for attractive investments.
Companies can boost ROE by increasing leverage, which reduces the safety of the investment. Therefore, it is useful to look at the return on assets (ROA), which measures a company's earning power regardless of its capital structure. A widening gap between ROE and ROA may be a warning sign that should be thoroughly investigated.
Earnings per share is a popular metric used to value a company (using P/E ratio); growth in EPS is often used to judge company growth potential. However, many investors believe that EPS is an inferior metric to ROE, because it ignores the amount of capital the company used to generate earnings.
Free cash flow shows how much cash a company generates from operations, above and beyond what is required to maintain or expand its productive assets. This cash can be returned to investors, or spent by management on growing the company or paying back its debts.
Balance sheets of many companies contain intangible assets such as goodwill, trademarks, patents, etc. Many investors consider intangibles more difficult to value than physical assets. If intangible assets had been valued incorrectly, they must be impaired, resulting in a loss charged against shareholder equity. This chart demonstrates the potential loss to shareholder equity from such impairments.
Companies often use debt financing to increase their return on equity. However, as the amount of debt financing increases relative to the amount of equity financing, the company becomes more sensitive to down turns and other negative events. As a result, many investors use the ratio of debt to equity as a measure of a company's financial risk, and avoid companies that have this ratio above 1.
This chart shows shareholder equity as a percentage of total assets, allowing investors to judge the overall leverage. Companies with a higher proportion of equity can be viewed as safer investments. This metric is particularly important for highly leveraged institutions, such as banks, where it must be at least 4% according to government regulations.
This chart shows the cumulative dilution of investor ownership in a company over time. Dilution reduces an investor's participation in the future earnings. Dilution increases when a company issues new shares, and decreases when a company buys its shares back. Many investors avoid companies with large chronic dilution.
analysis provides insight into factors affecting the Return On Equity of a company.
The DuPont equation decomposes ROE as follows:
ROE = (Net margin) * (Asset turnover) * (Asset to equity ratio)
Net margin indicates operating efficiency, Asset turnover measures the total asset use efficiency, and the Asset to equity ratio is a measure of financial leverage.
The dividend payout ratio tells investors what percentage of earnings a company returns to shareholders, and what percentage it retains and reinvests. This ratio represents a major capital allocation decision by the company, and can be used to judge management rationality. Rational management should pay out all earnings that cannot be productively reinvested. Therefore, a low dividend payout ratio for a profitable company with a low growth potential may be a warning sign.
Many investors use the P/B ratio as a quick way of judging company valuation. Value investors - followers of Graham and Dodd - specifically seek out companies with low P/B ratios. However, investors should be careful not to make investment decisions on this metric alone, without considering a company's earning and growth potential, since a low P/B ratio can be a sign of a bleak future for the business.
P/E ratio is a popular way of making a quick judgment of a company valuation. Value investors - followers of Graham and Dodd - often seek solid companies with low P/E ratios as investment opportunities. However, P/E ratio represents an oversimplified approach to business valuation, and can often lead to incorrect investment decisions.
In March 1996, the Company issued 2.6 million common shares and received net proceeds of approximately $75.4 million which was used to retire debt.
In February and August 1999, the Company's Board of Directors authorized the officers of the Company to implement a common share repurchase program in response to what the Company believed was a distinct under valuation of the Company's common shares in the public market. At June 30, 2000 and December 31, 1999, treasury stock recorded on the Company's consolidated balance sheet consisted of 6,601,250 and 1,860,300 common shares at a cost of $88.7 million and $25.8 million, respectively.
In December 2001, the Company completed a 3.2 million registered common share offering. Net proceeds of approximately $57.9 million were used to repay amounts outstanding under the Company's revolving credit facilities.
The Company filed a registration statement on Form S-11, which was declared effective on February 25, 2002, to register 2.8 million common shares to be issued in connection with a Purchase and Sale Agreement among the Company and Burnham, Burnham Pacific Operating Partnership, L.P., and BPP/ Van Ness, L.P. Under the terms of the purchase agreement, the Company acquired one real property asset and all of Burnham's direct and indirect partnership and membership interests in another real property asset in exchange for $64.5 million, consisting of at least $15.1 million in cash and, at the Company's option, some or all of the 2.8 million common shares offered pursuant to the registration statement on the aforementioned Form S-11 or additional cash.
For the three months ended March 31, 2003, in conjunction with the acquisition of a shopping center, the Company assumed liabilities of approximately $8.4 million. In connection with the merger of JDN Realty Corporation, the Company issued approximately 18.0 million common shares at an aggregate value of $381.8 million, $50.0 million of preferred stock, assumed mortgage and unsecured debt at a fair value of approximately $606.2 million and other liabilities of approximately $40.0 million.
In May 2004, the Company issued and sold 15,000,000 of DDR Common shares. Net proceeds from the sale of the common shares were approximately $491 million.
...in February 2007, the Company received approximately $751.0 million in exchange for 11.6 million of its common shares upon the settlement of the forward sale agreements entered into in December 2006.
On February 22, 2007, the IRRETI shareholders approved a definitive merger agreement with the Company pursuant to the merger agreement. The Company acquired all of the outstanding shares of IRRETI for a total merger consideration of $14.00 per share, of which $12.50 per share was funded in cash and $1.50 per share in the form of DDR common shares. As a result, on February 27, 2007, the Company issued 5.7 million of DDR common shares to the IRRETI shareholders for a total consideration of approximately $394.2 million valued at $69.54 per share...
On February 23, 2009, the Company entered into a stock purchase agreement (the "Stock Purchase Agreement") with the Investor to issue and sell 30 million common shares for aggregate gross proceeds of approximately $112.5 million to the members of the Otto Family. The agreement allows for the issuance of warrants to purchase up to 10.0 million common shares with an exercise price of $6.00 per share to the Otto Family.
In May and September 2009, the Company issued common shares as part of the transaction with Mr. Alexander Otto (the "Investor") and certain members of the Otto family (collectively with the Investor, the "Otto Family"), resulting in aggregate gross equity proceeds of approximately $112.5 million (Note 10). The Company used the total gross proceeds to reduce leverage. The Company also raised $157.6 million through the issuance of 18.6 million common shares at a weighted average price of $8.46 per share in the nine months ended September 30, 2009, under the continuous equity program. The Company expects to commence a new common equity program pursuant to which the Company can sell equity into the open market from time to time at its discretion at other than fixed prices.
As part of deleveraging goals, in February 2010 the Company issued 42.9 million common shares in an underwritten offering. The net proceeds of approximately $338.1 million were utilized to reduce the outstanding balance on the Company's revolving credit facilities in anticipation of repaying two series of unsecured notes that mature in May and August of this year and additional secured and unsecured debt that matures in the near future.
Mr. Alexander Otto and certain members of his family exercised their warrants for 10 million common shares for cash proceeds of $60 million in March 2011. In addition, in March 2011, the Company entered into a forward sale agreement to sell an aggregate of 9.5 million of its common shares for net proceeds aggregating $130.2 million, or $13.71 per share, which settled in April 2011. In April 2011, the net proceeds from the issuance of these common shares were used to redeem all outstanding shares, aggregating $180 million, of the Company's 8.0% Class G cumulative redeemable preferred shares at a redemption price of $25.1 per Class G depositary share (the sum of $25.00 per share and dividends per share of $0.105556 prorated to the redemption date).
In May 2013, the Company entered into forward sale agreements with respect to 39.1 million of its common shares. In September 2013 and October 2013, the Company settled forward equity agreements totaling 3.96 million and 35.14 million common shares, respectively, for an aggregate net proceeds of $701.3 million, at a price to the Company of $17.94 per share. The Company used the net proceeds received upon settlement of the forward sale agreements to partially fund the Blackstone Acquisition.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. ASU No. 2016-15 provides guidance on certain specific cash flow issues, including, but not limited to, debt prepayment or extinguishment costs, contingent consideration payments made after a business combination and distributions received from equity method investees. In addition, in November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230: Restricted Cash. ASU No. 2016-18 clarifies certain existing principles in Accounting Standards Codification (ASC) 230, including providing additional guidance related to transfers between cash and restricted cash and how entities present, in their statements of cash flows, the cash receipts and cash payments that directly affect the restricted cash accounts. These standards are effective for periods beginning after December 15, 2017, and shall be applied retrospectively where practicable. Early adoption is permitted. The Company adopted the updated standards effective January 1, 2017. The adoption of these standards modified the Company's 2017 presentation of certain activities within the consolidated statements of cash flows and related disclosures.