ii view: Tritax Big Box REIT in exclusive dividend club

Benefiting from e-commerce trends, this warehouse owner is offering a potential dividend yield of over 5%. 

Covid-19 update

• Quarterly dividend payments to continue
• Withdrawing previous 2020 full-year dividend target of 7p per share
• Quarterly dividend down 9% year-over-year to 1.5625p per share

Chief executive Colin Godfrey said:

“The company remains well positioned to navigate a prolonged period of uncertainty and to minimise the potential impact on its business and on its financial performance. 

"With a lack of visibility on the depth or duration of the crisis, we are working to ensure that the company remains in a robust position over the longer term by maintaining our existing strong relationships with customers. We are also preserving a well-funded balance sheet by taking a disciplined approach to all non-essential capital expenditure, whilst adopting a conservative stance in relation to our Q1 dividend payment."

ii round-up:

In contrast to a wealth of companies suspending dividend payments, warehouse owner Tritax Big Box REIT (LSE:BBOX) is to continue paying its quarterly dividend. 

The UK real estate investment trust (REIT), owner of over 55 properties, today declared a first-quarter dividend payment of 1.5625p per share, down from the 1.7125p paid in the first-quarter last year. 

Amazon.com (NASDAQ:AMZN) at 13.1% of rent payments is its top tenant, followed by supermarket Morrisons (LSE:MRW) at 6.8%, kitchen supplier Howdens (LSE:HWDN) at 5.2% and the Co-op and Tesco (LSE:TSCO) each at over 4%. 

Around half its annual rent take comes from Covid-19 defensive sectors such as food retail and postal couriers. Only three of its buildings are currently non-operational.  

In line with fellow warehouse owner Segro (LSE:SGRO), Tritax shares were little changed in early UK trading. Over the year-to-date Tritax shares are down by around 19%, although that's better than the approximate 40% falls suffered by office and shop owners Land Securities (LSE:LAND) and British Land (LSE:BLND).

Several Tritax tenants are experiencing unprecedented disruption as a result of measures to tackle Covid-19. 86% of rents have been collected in the current period compared to 100% in 2019. Discussions with tenants are ongoing, with the collection of 96% of rents expected by the end of May. 

Given current uncertainties, management felt it prudent to withdraw its recently announced target for a 2020 full-year total dividend of 7p per share – a rise from a total of 6.85p paid over 2019. 

ii view:

Tritax Big Box REIT continues to benefit from the structural change in shopping habits, as consumers switch from the high street to buying online, creating ongoing demand for logistics space to fulfil these orders.

Although suffering some challenges itself, Tritax management noted its belief that the Covid-19 crisis may act as a catalyst for change, accelerating the use of e-commerce platforms as consumers shop more and more online. 

For investors, the dividend payment, underwritten by the group’s rental income, provides the major attraction. A continuation of an albeit reduced payment is clearly good news for investors. Although far from guaranteed, assuming further quarterly payments of 1.5625p per share leaves the shares on a prospective dividend yield of over 5% at a share price of 120p. In a Covid-19 world, income yields of this magnitude are now very hard to find.
Positives: 

• Exposure to structural change in shopping habits
• Attractive dividend payment 

Negatives:

• Year-end 2019 net asset value per share down 1.2% to 151.06p
• 7p per share dividend target withdrawn

The average rating of stock market analysts:

Buy