RDI dividend grows as strategies boost earnings

Asset sales helped RDI Reit deliver dividend growth close to the top end of its forecast for the six months to February.

The group, which reported its interim results on Wednesday, received £211.8m for assets disposed of at an average premium of 8.7% to August 2017 market values. An interim dividend of 1.35p per share was declared, which represented an increase of 3.9%, fully covered by a payout ratio of 92.5%.

The company, which invests in the UK and Germany, continues to appeal to investors seeking steady pound-denominated income returns, said CEO Mike Watters.

Underlying earnings per share of 1.46p were achieved, ahead of target.

Watters said RDI’s strategies were helping to generate steady earnings per share for investors.

“We continue to make good progress against our strategic priorities, with underlying earnings per share growth of 8.2%, which is well ahead of target.”

RDI had sold low-growth assets and then reinvested capital in properties that offered better growth prospects.

Watters said the company expanded its hotel portfolio and had recently moved into London serviced offices. It had also cut its exposure to UK retail in light of negative sentiment given uncertainty about how the Brexit process will work.

RDI increased its stake in the £104.4m IHL hotel portfolio to 74.1% from 17.2% at the end of August 2017. The deal was concluded at a net initial yield of 6.9% and a yield on equity of more than 10%.

It also acquired an 80% interest in a £161.7m London serviced office portfolio at a net initial yield in excess of 6% and yield on equity of more than 9%.

RDI’s overall retail exposure was reduced to 45.3% from 60% at the end of August.

UK shopping centres accounted for 18.8% of its assets by market value.

Peter Clark, a portfolio manager at Investec Asset Management, said that RDI was gaining momentum. “These are good results, with management delivering on its plan.

“It will take some time for the strategy to take root but RDI Reit seems to be heading in the right direction against a challenging market backdrop.”