Security of Dividends for Investors Looking at Real Estate Shares: LLC, GPT, DXS, MGR, SGP

  • Jul 02, 2020 AEST
  • Team Kalkine
Security of Dividends for Investors Looking at Real Estate Shares: LLC, GPT, DXS, MGR, SGP

Summary

  • COVID-19 induced lockdowns and social distancing measures have affected the construction activities, which, in turn, have impacted the real estate sector.
  • Significant job losses in the current economic crisis have also played a considerable role in the recent struggle of the industry.
  • Real estate players have withdrawn FY guidance and even suspended dividend payments in light of the uncertainty surrounding the pandemic.
  • Lendlease scraps its dividend as its earnings were impacted due to COVID-19 while Stockland downgraded its distribution and earnings for the year ending 30 June 2020.
  • GPT Group has withdrawn its FY20 guidance and is revising its distribution payout policy to line up with free cashflow.

Companies that offer dividends to its shareholders often indicate a stable financial state of the company. Organisations that do not generate considerable profits are generally not able to provide dividends to the stakeholders. Dividend stocks have demonstrated growth and development even during times of economic slowdown.

One of the primary benefits of dividend-paying companies is the steady growth of dividends over time. Generally, the well-established dividend-paying companies tend to raise their dividend payouts on an annual basis. Also, historical data suggests that dividend stocks have withstood testing times better than the stocks that don’t pay a dividend.

Real estate companies, which generally pay dividends, are facing delays in securing projects due to no construction amid the COVID-19-induced restrictions. Hence, some real estate players are lowering their dividend payouts or even suspending them.

Let us have a look at five ASX-listed real estate stocks and how are they faring in the current environment - LLC, GPT, DXS, MGR, SGP.

Lendlease Group (ASX:LLC)

Real estate player Lendlease Group deals in the retail property, asset management as well as in construction. The Group has its operations in four regions, including Europe, Asia, Australia, and the Americas.

On 1 July 2020, the Company provided its FY20 Unaudited Results update and stated that the profit for the fiscal year 2020 for the core business would be dependent on:

  • Conclusion of transactions of some material for developing segment which could be delayed.
  • Impact of diminished productivity in the construction segment.
  • Impact of any revaluations in investments segment.

Considering the anticipated FY20 outcomes (Loss after tax expected in the range A$230-A$340 million) and the current economic environment, the final dividend for FY2020 is unlikely to be paid.

Moreover, subject to the final income of the Trust for the financial year 2020, it is expected that a small distribution will be paid from the Lendlease Trust.

Stock Information: On 2 July 2020, LLC stock ended the trading session at A$12.940, up by 5.979%, with a market capitalisation of A$8.4 billion. The annual dividend yield of the stock is 5.16%.

GPT Group (ASX:GPT)

ASX-listed player GPT Group is one of real estate investment trust and most prominent diversified property groups across Australia. GPT Group owns and operates nearly A$24.8 billion portfolios of logistics, retails, and office property assets in Australia.

On 9 June 2020, The GPT Group revealed that it has independently revalued its retail portfolio as of 31 May 2020. The GPT Group had its seven directly secured retail assets independently valued. The revaluations caused a decline in value of approximately 8.8% or nearly A$476.7 million, as compared to the book value on 31 December 2019.

Source: ASX Announcements

Moreover, GPT Group has withdrawn its full-year 2020 guidance, and the Group is amending its distribution payout policy to line up with free cashflow.

Stock Information: On 2 July 2020, GPT stock ended the trading session at A$4.460, up by 3.241%, with a market capitalisation of A$8.42 billion. The annual dividend yield of the stock is 5.42%.

Dexus (ASX:DXS)

One of Australia’s prominent real estate groups, Dexus is engaged in managing a superior quality Australian property portfolio that is equal to A$33.8 billion. The Group considers the strength and quality of its relationships are central to success.  

Recently, on 24 June 2020, Dexus disclosed that out of its 118 assets, 107 (including 65 industrial properties and 42 office properties) had been valued externally as of 30 June 2020.

The external independent valuations have ensued in an overall estimated decline of approximately A$195 million or 1.2% on previous book values for the 6-months to 30 June 2020.

Moreover, the Company mentioned that more details relating to specific valuations of individual property should be available in the annual results of 2020, which will be out on 19 August 2020.

Approximate distribution for the six months

On 16 June 2020, Dexus disclosed details relating to its estimated distribution for the 6-months ending 30 June 2020 which is 23.2 cents/stapled security.

Moreover, the Company confirms that its distribution reinvestment plan is still suspended, and it will not be in process for this distribution payment.

Stock Information:  On 2 July 2020, DXS stock ended the trading session at A$9.590, up by 2.239%, with a market capitalisation of A$10.24 billion. The annual dividend yield of the stock is 4.5%.

Mirvac Group (ASX:MGR)

ASX-listed Real estate investment company Mirvac Group is into the business of property asset management, real estate investment and development and 3rd party capital management activities. Through its end-to-end model, Mirvac Group develops, builds, manages, and owns superior quality Australian assets, giving a legacy for upcoming generations.

According to an ASX announcement dated 24 June 2020, Mirvac Group revealed that its distribution for the year ending on 30 June 2020 was 9.1 cents per stapled security. Considering that the half-year distribution is already paid (6.1 cents/stapled security), the distribution for the 6-months ending 30 June 2020, is 3.0 cents/stapled security.

Moreover, the Group notified that the distribution is anticipated to be paid on 14 September 2020.

Investment Property Preliminary Valuations

For 30 June 2020, preliminary valuations across the Group’s 63 show a decline in value by nearly 2.8% (or ~A$306 million) as compared to the 31 December 2019 book value.

Source: ASX Announcements

Notably, the Group will release its financial results on 20 August 2020 with a comprehensive review of FY20 performance.

Stock Information: On 2 July 2020, MGR stock ended the trading session at A$2.330, up by 3.556%, with a market capitalisation of A$8.85 billion. The annual dividend yield of the stock is 4.49%.

Stockland (ASX:SGP)

Australia-based Stockland was founded in 1952 and is a diversified property development company. The Company is engaged in managing, developing, and owning a broad portfolio of workplace along with logistics assets, retail town centres, retirement living villages and residential communities.

Property developer and shopping mall owner, Stockland is another well-known player to downgrade distribution and earnings for the year ending 30 June 2020.

On 22 June 2020, Stockland revealed an estimated distribution of 10.6 cents per Ordinary Stapled Security for the 6-months to 30 June 2020.

Moreover, the Company notified that record date for determining entitlement to the second half of 2020 distribution is 30 June 2020 and distribution payment will be made on 31 August 2020.

Stockland stated that it has a robust liquidity position of approximately A$1.6 billion at 30 April 2020 and anticipates gearing will continue within the target range of 20-30% at 30 June 2020.

Also, on 22 June 2020, Managing Director and CEO, Mark Steinert retired after 7.5 years in his role.

Stock Information: On 2 July 2020, SGP stock ended the trading session at A$3.530, up by 2.023%, with a market capitalisation of A$8.25 billion. The annual dividend yield of the stock is 7.2%.

 


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