All property-related shares have taken a hammering this year, but this may have thrown up a few opportunities.
Given recent headlines the premise of this article might seem a joke. But just as it is said that a rising tide lifts all boats when it comes to buying shares -- so the reverse is true. All property-related shares have taken a hammering this year, but this may have thrown up a few opportunities for those prepared to stick their neck out. The trick for private investors is in sorting wheat from chaff.
In particular, a couple of property trusts stand out as having the potential to offer substantial income -- if the dividend yield can be maintained.
Invesco Property Income Trust
The Invesco Property Income Trust's
(LSE: IPI)
overall aim is "attractive" income from commercial property in the UK and Europe. It's certainly attractive if they can keep it up; the yield at today's price of 28p is a massive 24% payable quarterly -- more if compounded.
With the final results for the year ended 31 March announced last week, IPI was emphatic, stating: "It is the intention of the Board to maintain this level of dividends and to continue to make four quarterly dividend payments." The net asset value was 66.3p per share at the end of March -- a fall of 48.4 % from the previous year end. This may well be lower in reality, now.
There's a comprehensive and refreshingly candid interview with the trust's investment manager who shares his outlook on the property sector and its prospects for the future here.
Buying into IPI at today's price is effectively a gamble on whether or not you think the Trust will survive and maintain the yield. At the current level, you'll have your initial investment repaid in just four years if it can.
Kenmore European Industrial Fund
Another interesting property trust is the Kenmore European Industrial Fund
(LSE: KEIF)
whose portfolio lies in industrial real estate in western and northern Europe. The fund has no UK-based assets but the share price has still been trashed over the past quarter as the chart shows. The current price is 49p, with a stated net asset value of 121.9 pence per share at the end of March. This was actually up on the last quarter due to strength in the Euro despite a 1.78% decline in property assets. If the dividend is maintained here it runs at a "mere" 15.3%!
With the final results to the end of December, KEIF made around £5.3m on rentals. The market capitalization at today's price is £68.25m.
The Kenmore Fund is perhaps safer than the Invesco due to its more robust balance sheet, wider geographical spread and lack of exposure to UK commercial property, which appears to have enjoyed the most inflated of European bubbles.
In both cases, something's got to give; either the shares will be re-rated or the dividend yields will be cut. Personally, I've invested in both on the basis that the former will come to pass; wheat amongst the chaff perhaps?
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