Scentre Group (ASX: SCG) announced a dividend of 11.30c/ share today, slightly above the two 11.08c/ share dividends last year. The share price was little changed on the news, with the slight uptick in dividend payouts broadly in line with investor expectations. As REITs pay out a large percentage of their income to obtain tax benefits of listing as a REIT, they typically attract dividend investors looking for yield. As such, the dividend payouts are sometimes a good indication of the earnings at a REIT is expected to generate, as dividend increases will commonly precede earnings increases if announced first.
Scentre Group is a REIT composed primarily of high-quality Westfield shopping centres. Following the spinoff of Westfield’s real estate into a separate listed entity, Scentre Group was the main real estate investment vehicle of the founding Lowy family. This is because they choose to concentrate on high quality, more premium shopping centres that are believed to be less sensitive to a decline in retail as consumers shift to online shopping. People have a greater preference for seeing luxury products before buying them, explaining continued demand for shops in Pitt St Mall, their signature retail centre.
Scentre Group has a long WALE for a retail REIT, meaning that most clients are relatively stable. It is however common for landlords to charge a certain percentage of revenue. This results in a portion of earnings being directly exposed to the economic cycle, given that the consumer discretionary sector is very cyclical. The company trades on a PE of 9.3 and has a trailing dividend yield of 5.53%, both of which are substantially below listed peers.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
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