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Grainger opts to increase dividend payouts

Half of net rental income will now be paid out as dividends
May 20, 2016

This has been a busy six months for the UK's largest listed landlord Grainger (GRI), a period that ushered in substantive change. With strategy focused on the UK rental sector, the group has sold its equity release division and its assets in Germany to raise £500m. Some of this was used to reduce debt, with the rest reinvested into the private rented sector (PRS). The PRS-targeted pipeline of £850m has now seen deals secured worth £268m, some way ahead of schedule.

IC TIP: Buy at 231p

Other changes include dividend policy; the intention is to distribute half of net rental income as dividends. For the current year, Grainger reckons the total payout could be 4p a share - nearly a 50 per cent hike on the previous year.

Acquisitions helped to boost net rental income by 12.5 per cent to £18m, while rent increases of 5.4 per cent on new lets and 3.1 per cent on renewals were more than enough to offset the loss of income from disposals. Developments include one of the biggest PRS schemes in the UK to date. Grainger plans to construct a 600-unit build-to-rent scheme at Salford Quays, which is expected to deliver a gross yield of 8 per cent.

Analysts at Peel Hunt are forecasting adjusted EPRA net asset value at the September year-end of 332p (from 319p in 2015).

GRAINGER (GRI)
ORD PRICE:231pMARKET VALUE:£963m
TOUCH:231.1-231.5p12-MONTH HIGH:256pLOW: 201p
DIVIDEND YIELD:1.5%TRADING PROPERTIES:£325m
DISCOUNT TO NAV:18%NET DEBT:183%
INVESTMENT PROPERTIES:£385m**:

Half-year to 31 MarNet asset value (p*)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201526321.11.60.64
201628336.66.71.45
% change+8+73+319+127

Ex-div: 2 Jun

Payment: 1 Jul

*Trading properties marked to market value (triple net NAV)

**Includes investments held in associates and joint ventures