Best of the Yields - Australia's REITs under Spotlight

  • Jan 07, 2020 AEDT
  • Team Kalkine
Best of the Yields - Australia's REITs under Spotlight

While REIT space has not drawn a lot of attention in the past, some analysts believe that the dividends offered by the REIT sector - which are substantially higher than most of the other sectors in the ASX – is a possible attraction point for investors who are looking for a regular source of income.

Also, a rise in property prices (2.4% growth in the weighted average of eight capital cities for the quarter ended 30 September 2019) is likely to have an impact on the REIT segment.

S&P/ASX200 A-REIT (Sector) has generated a return of 15.82% for the 1-year period starting from 07 January 2019 to 06 January 2020. During the same period, S&P/ASX200 generated a return of 19.87%.

In this article, we will focus on three REIT stocks – CQR, CMW and VCX - with a relatively high dividend yield.

Charter Hall Retail REIT (ASX: CQR)

Managed by Charter Hall Group (ASX: CHC), Charter Hall Retail REIT operates a convenience-based retail portfolio worth $2.9 billion. The company focuses on supermarket anchored shopping centres across Australia.

Source: Company Website

BP Portfolio Investment and Earnings Guidance Upgrade

On 12 December 2019, Charter Hall Retail Management Limited announced an investment in a Charter Hall managed new partnership that will acquire a 49% stake in a portfolio of BP Australia-leased 225 Long WALE Convenience Retail properties.

Charter Hall Retail REIT (ASX:CQR), Charter Hall Long WALE REIT (ASX:CLW) and Charter Hall Group (ASX: CHC) will jointly own the partnership with a 30%, 50% and 20% stake, respectively. CQR will invest approximately $137 million for its stake in the partnership.

Based on significant acquisitions and strong FUM growth, the Group’s FY20 guidance has been upgraded to ~30% growth in post-tax operating earnings per security over FY19.

FY 2019 Results

For FY 2019 (ended 30 June 2019), CQR generated operating earnings of $128.0 million, 3.9% higher than 123.2 million in FY 2018. Statutory profit stood at $53.1 million, significantly lower than FY 2018 figure of $146.4 million. The operating earnings per unit grew 2% YoY to reach 31.12 cents. Distributions per unit increased by 2% YoY to reach 28.76 cents leading to a payout ratio of 92.4%. Net property income (NPI) grew 2.1% as compared to the 1.8% growth in FY 2018.

For further information on FY 19 results, click here

Dividend Story

Charter Hall Retail REIT announced a dividend of $0.1452 on its fully paid securities for a period of six months. The dividend will be paid on 28 February 2020.

CQR ‘s dividend yield (annual) is 6.73%.

Stock Performance

The stock of CQR closed at $4.345 on 07 January 2020, up 0.81%. The company has a market cap of $1.91 billion and approximately 442.54 million outstanding shares.

The 52-week high and low value of the stock is $4.790 and $4.195, respectively. The stock has generated a negative return of 4.22% in the last six months.

Cromwell Property Group (ASX: CMW)

An ASX-listed real estate investment manager, Cromwell Property Group has $11.9 billion in assets under management (AUM). The company, with a market capitalisation of ~$3 billion, operates across Australia, New Zealand and Europe.

Source: Company Website

FY 2019 Results

For FY 2019 (ended 30 June 2019), Cromwell reported a statutory profit of $159.9 million, a decline compared to FY 2018 ($204.1 million). The company’s operating profit grew 11.1% to reach $174.2 million (FY 2018: 156.8 million). Total AUM grew by $400 million to reach $11.9 billion. FY 2019 distribution per security was 7.25 cents as compared to 8.34 cents in FY 2018.

Dividend Story

Cromwell Property Group announced a dividend of $0.01875 on 23 December 2019 on the security CMW – Fully Paid Ordinary/Units Stapled Securities for a period of three months. The dividend will be paid on 21 February 2020.

CMW’s dividend yield (annual) is 6.19%.

Stock Performance

The stock of CMW closed at $1.192 on ASX on 07 January 2020, an increase of 0.17% from its previous closing price. The company has a market cap of $3.1 billion and approximately 2.61 billion outstanding shares. The 52-week high and low value of the stock is $1.345 and $0.980, respectively. The stock has generated a negative return of 7.03% and 1.24% in the last three months and last six months, respectively.

Vicinity Centres (ASX: VCX)

Vicinity Centres owns and operates retail properties across Australia. The company manages 63 operating centres and has AUM of $26 billion.

50% Stake in Uni Hill Factory Outlets, divestment of Lennox Village

On 23 December 2019, Vicinity announced that it will acquire a 50% stake in Victoria-based Uni Hill Factory Outlets. The company also announced that it will divest its 50% interest in Lennox Village.

The acquisition of Uni Hill from MAB Corporation will be worth $67.8 million while the company stands to make $31.5 million through its share sale in Lennox Hill to Challenger.

FY 2019 Results

For FY 2019 (year ended 30 June 2019), Vicinity reported a statutory net profit of $346.1 million. Funds from operations (FFO) grew 2% (comparable growth) to reach $689.3 million. FFO per security stood at 18 cents, compared to 18.2 cents in FY 2018. Distribution per security stood at 15.9 cents, reflecting a payout ratio of 87.7%

Dividend Distribution

Vicinity Centres announced a dividend of $0.077 on 03 December 2019 on the security VCX – Fully Paid Ordinary/Units Stapled Securities for a period of six months. The dividend will be paid on 02 March 2020.

VCX’s dividend yield (annual) is 6.21%.

Stock Performance

The stock of VCX closed at $2.535 on ASX on 07 January 2020, an increase of 0.6% from its previous closing price. The company has a market cap of $9.48 billion and approximately 3.76 billion outstanding shares. The 52-week high and low value of the stock is $2.720 and $2.415, respectively. The stock has generated a negative return of 1.56% and 4.55% in the last three months and last six months, respectively.


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