Listed property companies expect flat to negative dividends in coming months but they remain a popular option for investors seeking high yields, say analysts.
Among a number of the key listed property companies reporting to shareholders this week on their financial performance, Kiwi Income Property Trust yesterday said it expected to deliver distributions for the March year of 6.6 cents per unit, down from 7 cents per unit in 2012. It posted an after tax profit of $89.2 million in the March year.
Goodman Property Trust also held its annual general meeting yesterday after reporting a $40.5 million net profit for the year to March.
It expects to deliver similar results over the next 12 to 18 months and to maintain its tax paid distributions at 6.25 cents.
Earlier in the week Property for Industry reported a rise in net profit of 6 per cent to $7.046 million in the six months to June 30, 2012 from the same time last year. But that reflected one-off gains which offset a higher deferred tax bill and a 5.9 per cent fall in gross rental income to $14.7m.
Distributable profit , which adjusts for the fair value changes and other items, fell 4.9 per cent to $7.6m.
It warned investors to expect lower dividends as the property company's earnings continue to be hurt by expiring leases and vacant properties.
Craigs Investment Partner analyst Chris Byrne said while guidance was down among these three companies, the decline was not significant enough to force investors to look elsewhere.
"It's not enough to bother investors attracted to the sector because of its high yields compared to bank term deposit rates," he said.
Driven by low interest rates,companies in the listed property sector had delivered average gross yields of 8.5 per cent for the year to March 2012, well above ten-year government bank bond yields of around 4.7 per cent.
Property was seen as a defensive sector where there is value and had out-performed the NZX-50 over the long term, he said.
Kiwi Income Property Trust chairman Mark Ford said it had achieved an 9.7 per cent annual return since listing in 1993 and had consistently outperformed the general equities market.
Across the board, Byrne said rents were flat, but occupancy rates had held up. The economy wasn't doing doing well enough to transfer investor interest from defensive assets to cyclical assets.
"We would expect them to underperform if the economy did start to improve significantly over the next 12-18 months as people looked to rotate out of defensive yields."
But Byrne believes all three companies would be looking for rental growth and greater business confidence.
In particular, Goodman would want a higher yield and development margin on its development activity, he said.
The costs of earthquake strengthening is also overhanging the sector, he said.
Forsyth Barr analyst Jeremy Simpson said there were uncertainties around earthquake strengthening fees but most listed companies had relatively modern buildings which rated well in terms of relevant building codes.
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