Yew Grove dividend preview

Ireland-based property investor Yew Grove REIT (LON: YEW) will announce its fourth quarter dividend for 2020 in the middle of February. So far, each quarterly dividend has been higher than the previous one and, with good levels of occupancy and rent payments there is no reason to think that will not be the case this time.

The third quarter dividend was 1.3 cents a share, taking the total for the year so far to 3.75 cents a share. Hardman suggests a total dividend for the year of 5.5 cents a share. That suggests a fourth quarter dividend of 1.75 cents a share.

The total dividend is less than last year. That is because of a special dividend.

At 84 cents, the shares would yield 6.5% on the forecast dividend. The dividend is expected to increase each year.

Cash

One of the things holding back Yew Grove is a lack of cash. The bank facility has been extended to December 2024 and increased to €53.6m. Non-core properties have been sold. That leaves Yew Grove with spare facilities of €15m. The target loan to value has been increased to 40%.

Even so, there are plenty of attractive property investments with impressive yields.

Yew Grove has collected 100% of its quarterly rents and, by the 12 January, nearly all the monthly rent. This indicates the benefits of having government and multinational tenants and assets outside of central Dublin. It also shows the reliability of cash flow.

Following new letting agreements the annual rent roll is €11.3m. Vacancies are below 4% of the portfolio.

Moving market

As part of the tax regulations for Irish REITs they have to gain a full listing in the EU in a minimum period. This has been extended to March 2022. The accounts have to be reasonably up to date to go ahead with the switch. Yew Grove cannot move to the Main Market in London now that it does not come under the EU.

Management would like to raise more cash because of the potential investments that are available. Doing that at the same time as switching markets would make sense, but there is no certainty that the timing would be right.

Yew Grove is also assessing other funding options, so that the business can grow. This will enable the dividend to increase and NAV to move ahead. NAV should be around 98 cents a share.

The shares are illiquid and there is the uncertainty about what market the shares will be traded on in a year. Even so, the yield is attractive and the discount to NAV is around 14%.