Schroder Reit (SREI) structures its approach to investment along both macro “mega themes” and “factors outside of the normal real estate cycle”. Chief among these is a focus on cities with GDP, population and employment growth well above the UK average, and which global head of real estate Duncan Owen argues still differentiates the trust.
Other tacks – eschew shopping centres and the City of London, but bulk up on multi-let estates in the Midlands and ‘click and collect’ retail warehouses – seem less contrarian. Still, and aside from a 2.3 per cent fade in estimated open market rental value, Schroder’s assets continue to outperform their benchmark. In the 12 months to March, the underlying portfolio grew 11.8 per cent on a total return basis.
Not that you’d know it from a widening discount to net asset value. One lever the Reit’s board could pull to correct this is an improved dividend, whose cover has ticked up to 109 per cent. Perhaps conscious of the tapping feet of income-seeking investors, Mr Owen cautiously suggested that “it would be realistic for analysts to consider we could be one of the Reits that raises their dividend”.
And why not? The portfolio’s reversionary income yield of 7 per cent is 130 basis points ahead of the MSCI benchmark, and is expected to lead to stronger income growth in the next two years.
| SCHRODER REAL ESTATE INVESTMENT TRUST (SREI) | ||||
| ORD PRICE: | 61.7p | MARKET VALUE: | £320m | |
| TOUCH: | 61.7-62.3p | 12-MONTH HIGH: | 66p | LOW: 57.8p |
| DIVIDEND YIELD: | 4.0% | TRADING PROPERTIES: | nil | |
| DISCOUNT TO NAV: | 10% | NET DEBT: | 34% | |
| INVESTMENT PROPERTIES: | £467m** | |||
| Year to 31 Mar | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 48.6 | 20.9 | 5.7 | 2.74 |
| 2015 | 57.7 | 55.1 | 11.3 | 2.48 |
| 2016 | 62.2 | 36.3 | 7.0 | 2.48 |
| 2017 | 64.1 | 22.8 | 4.4 | 2.48 |
| 2018 | 68.2 | 33.8 | 6.5 | 2.48* |
| % change | +6 | +48 | +48 | - |
| Ex-div: | 10 May | |||
| Payment: | 31 May | |||
| *Dividends paid quarterly, XD and pay date refers to fourth-quarter dividend of 0.62p a share. **Includes joint ventures. | ||||
