Dipula Income Fund investors told to be patient
CEO says investors can expect flat dividend growth in 2019
Dipula Income Fund’s investors will need to remain patient before the SA-focused company achieves dividend growth that beats inflation .
CEO and founder Izak Petersen said the real estate investment trust’s dividend payouts, which grew about 4.5% in the year to August 2018, would taper off in the 2019 financial year before gaining momentum again in 2020.
Petersen said the company’s decision not to invest offshore but rather to spend its capital on enhancing its assets at home had paid off in 2018 while competing funds struggled to reward investors with strong dividend growth.
The real estate investment trust grew its A-share dividend by 4.5% and its B-share dividend rose 4.4% while its portfolio’s value increased by 25%.
Rival funds saw their dividends grow by only 1%-2% or even shrink this reporting season.
Petersen said he was happy to at least have grown dividends closer to inflation, which was hovering just below 5%, as market conditions were “extremely challenging”.
“We have grown our dividends in line with inflation which I believe is attractive, while some funds have fallen far short of it amid difficult operating conditions. I believe our shareholders support us because we focus on being a property company that is easy to understand. We haven’t created complicated offshore structures and then provided dividend growth that may not be repeatable,” Petersen said.
Overall, vacancies dropped from 8.5% to 7.5% and tenant covenants remained healthy. There was a significant drop in office vacancies, which reduced by 51% from 18.7% to 9.2%, better than the sector average of 11.2%.
Dipula was confident of delivering 7% growth in dividends per share for the year ending August 2020.
“We have spent a large amount of capital on upgrading our properties. These measures will show strong returns in 2020,” he said.
Wynand Smit, an analyst at Anchor Stockbrokers, said Dipula’s results were in line with expectations but that the company’s forecast for 2019 was worrying. He said Dipula’s shares were also illiquid and that it may be a takeover target.
“The circa 20% discount to net asset value for the share B-shares and the high yields on the A and B shares of circa 12% and 13.5% should start to look attractive for other real estate investment trusts,” he said.