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Growthpoint declares interim dividend, despite Covid-19 pressure

But dividend declines due to 80% pay-out ratio and dilutive November capital raise.
The Sandton headquarters of Growthpoint - South Africa's largest JSE-listed property group. Image: Moneyweb

Blue-chip listed real estate investment trust (Reit) Growthpoint Properties declared an interim dividend of 58.50 cents per share on Wednesday, for its half-year results to December 31, 2020.

The move is likely to be well received by most investors, despite a fall in the value of the dividend payouts. Many of its JSE peers have opted to withhold paying out interim dividends or defer the pay-out decision to each company’s respective financial year-ends.

Other listed property counters, such as Redefine Properties, Capital & Regional (UK) and Rebosis Property Fund, have even decided not to pay out full-year dividends in their latest results. These counters have faced ballooning loan-to-value (LTV) or gearing ratios, which is largely behind the decision not to pay dividends.

Read: No Capital & Regional dividends for Growthpoint in 2020

Listen: Garreth Elston of Reitway Global on Redefine not paying a dividend

Most Reits are choosing to withhold part of dividend pay-outs in order to retain cash amid the Covid-19 economic crunch, which has not only impacted rental income due to lockdowns but has seen devaluation of property assets.

Growthpoint’s latest interim dividend is based on an 80% pay-out ratio, so the group has also opted to retain some earnings to bolster its balance sheet and weather ongoing Covid-19 pandemic pressure.

The group’s interim distribution per share (DPS) is 47.5 cents lower than its comparative half-year period.

“Shareholders and noteholders are… advised that the DPS for the six months ended December 31, 2020 amounted to 58.50 cents per share, resulting in a 44.8% decrease when compared to the DPS for the six months ended December 31, 2019 [106 cents],” Growthpoint notes in its interim results statement.

“Shareholders and noteholders are also advised that the distributable income per share [DIPS] for the six months ended December 31, 2020 amounted to 73.1 cents per share, resulting in a 31% decrease when compared to the DIPS for the six months ended December 31, 2019 (106 cents),” it adds.

This means that Growthpoint is retaining 14.6 cents worth of interim distribution for each share.

“The decrease in DPS and DIPS is due to the 21.6% decrease in distributable income, the successful equity raise and dividend reinvestment plan in November 2020 which resulted in 408 290 684 additional shares issued and the reduction in the pay-out ratio from 100% of distributable income for the six months ended December 31, 2019 to 80% for the six months ended December 31, 2020,” the group points out in its Sens.

Read: Growthpoint plunges over 16% after R4.3bn capital raise

DPS is the key financial metric for evaluating the performance of SA Reits.

Meanwhile, Growthpoint’s net asset value (Nav) per share decreased by 7.6% to R21.32 for its half-year to the end of December, compared with R23.07 cents for its full-year period ended June 30, 2020.

This means that its share price is still trading at a significant discount to Nav.

Norbert Sasse, Growthpoint’s Group CEO, attributed the company’s “steady first-half performance” to the better-than-expected showing from its South African portfolio, good profits from the fund’s trading and development arm, income from funds management gaining impetus and its Australian investment outperforming in its offshore portfolio.

“Growthpoint continued to prioritise balance sheet strength and liquidity, and focused on the factors that we can control in this market. As a consequence, our results show a very stable business that is in good shape,” he said.

“We’ve lowered our South African gearing comfortably within our target range and have R5bn of liquidity. Growthpoint has a strong balance sheet, enabling us to pursue our strategic initiatives and declare a dividend of 80% of distributable income,” he noted.

“By paying our shareholders an interim dividend, we are reinforcing Growthpoint’s commitment to retaining our Reit status and our intention is to continue paying dividends twice a year of at least 75% of distributable income,” added Sasse.

Real estate analyst at Anchor Stockbrokers, Pranita Daya, said Growthpoint’s results are reflective of the current environment, especially amidst the Covid-19 pandemic and related challenges it has imposed.

“It makes sense in our view to have cut the pay-out ratio to 80% which we view as a more sustainable level,” she noted.

“Payment of an interim dividend may be welcomed by yield-focused investors, given that many property counters have deferred decisions around declaration of an interim distribution, citing caution around the ongoing uncertainties imposed by the pandemic,” she added.

Daya pointed out that while balance sheet challenges persist in the sector, Growthpoint’s loan-to-value (LTV) ratio of 41% is “still relatively conservative”.

“This is owing in large part to the equity raise Growthpoint completed during November 2020. However, it has come at the expense of dilutionary impacts to Nav/share and DIPS,” she said.

Still, Daya warned that “unknowns around market rents” and the impact on property valuations may have further ramifications for LTVs.

Growthpoint’s share price closed slightly down (0.14%) at R14.08 on Wednesday, following the release of its latest results. However, the market is yet to fully digest the results, with the group’s presentation to media and analysts taking place midday on Wednesday and Thursday.

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Unsurprising since they offered p!ss poor relief to many of their tenants. I imagine they’ll lose many when their lease expires – or they’ll have to offer big negative rental reversions Either way not great. We certainly look forward to moving from our premises. Many of the other tenants in our building aren’t too keen on staying either…

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