BWP Trust (ASX: BWP) has reported its FY19 result to investors which includes a special distribution for investors.
BWP Trust is a real estate investment trust (REIT) that owns buildings that mostly Bunnings Warehouse operate in. Wesfarmers Ltd (ASX: WES) owns the Bunnings business and also has a large stake in BWP Trust. It has a core portfolio of 66 properties with an average lettable area of 14,031m2, with 82% of those properties located in metro areas.
BWP Trust’s FY19 Result
In FY19 BWP Trust reported that its revenue increased by 2% and profit before gains on investment properties also increased by 2% to $115.9 million.
Like for like rental growth was 2.3% for the 12 months to 30 June 2019 with the average inflation on consumer price index (CPI) linked leases of 1.9%
The REIT also benefited from $53.4 million of gains in the value of its investment properties, although this wasn’t as much as last year’s $70 million increase. This led to statutory net profit of $169.4 million, a decrease of 7%.
BWP also revealed that its net tangible assets (NTA) per unit / share increased by 2.5% to $2.92.
At 30 June 2019 BWP said its gearing, being debt divided by total assets, was 17.3%. This is very healthy for a REIT, and slightly below the Board’s preferred range of 20% to 30%. It continues to search for investment opportunities.
During the year BWP sold four properties for $71.7 million, in Altona (VIC), Burleigh Heads (QLD), Epping (VIC) and Oakleigh South (VIC).
BWP Trust Distributions
BWP Trust declared a final distribution of 9.18 cents per unit, bringing the total distribution for the year to 18.11 cents per unit – an increase of 1.7%.
But, as a bonus for unitholders, BWP also declared a special distribution of 1.56 cents per unit due to the property sales that happened during the year.
BWP Outlook
In the short term BWP relies on the strength on the Australian economy and the repositioning of properties vacated by Bunnings. In the longer term it will be important for Bunnings to evolve, perform strongly and put the properties to good use.
Another issue could be that 57% of BWP’s rental income is subject to CPI annual adjustment, which will have lower growth whilst CPI remains so low.
Even so, BWP has guided for a marginally higher distribution next year.
Is BWP A Buy?
Excluding the special distribution, BWP offers a distribution yield of 4.8%. Whilst BWP Trust may do okay from here, I think the growth of online shopping could have a negative effect over the longer term, which is why I am wary about investing.
For defensive dividends I would much rather invest in the reliable shares in the free report below instead.
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