Schroder European Real Estate meets dividend promises
Good investment decisions in France and Spain helped the Western European-focused property fund achieve a 5.5% dividend yield
Schroder European Real Estate Investment Trust (Sereit), a property group which gives SA investors exposure to Western European capital cities, has met its pre-listing dividend yield target thanks to strong acquisitions in France and Spain.
Sereit acts as a rand hedge for SA investors. It promises consistent income payouts, instead of seeking market-beating capital growth.
The company achieved a 5.5% dividend yield in the year to September. A dividend yield is the ratio of a company’s annual dividend to its share price. A high dividend yield indicates good financial health and confidence in a company paying out dividends. In a low interest-rate environment investors seek high dividend yields.
Net profit increased 28% to €13.2m compared with €10.3m for the year to September 2017, results released on Monday showed. Total dividends of 7.4c per share were declared for the reporting period, reflecting a 42% increase on the full year 2017 dividend.
“This has been another strong year that has seen Sereit delivering growth in both net asset value and income, chiefly underpinned by the profitable disposal of lower-yielding assets alongside new investment into higher-growth industrial assets, as well as the active asset management of the existing portfolio and its tenants. This activity has enabled the company to grow the dividend and achieve its 5.5% IPO target dividend,” said chair Sir Julian Berney.
Fund manager Jeff O’ Dwyer said one of the most attractive acquisitions that Sereit made during the year was a 16,700m² freehold logistics property in Rumilly, southeastern France, for €8.6m, reflecting a net initial yield of 7%.
The asset had performed ahead of expectations immediately, supported by seven-and-a-half-year lease to a subsidiary of food multinational Nestlé.
He said industrial real estate — which includes the logistics sector — was the strongest performing asset class in Europe in 2017. He said industrial property in France had been especially profitable.
Sereit had also invested in Spanish shopping centres during the year, as the country continued to enjoy strong economic growth.
He said the company had €15m in cash to invest during its 2019 financial year and had “identified a range of potential investment opportunities” as he looked to increase the company’s asset base from €222m to €500m in the near future.
Sereit’s loan-to-value sat at 26% compared with 25% for the September 2017 year.
Correction: December 5 2018
This article has been corrected to reflect that Mr O’ Dwyer is the fund manager and not the CEO of Sereit