Dividend slide for Resilient begins

SLOWING IT DOWN: GOVT DEPARTMENTS, STATE SECURITY

Property group reports slower dividends for the first time in 14 years.

14 years. On Friday, Resilient declared a dividend (or distribution, as referred to in the property sector) of R5.65 for the year ending June 30, compared with R5.67 in the previous financial year.

A Moneyweb analysis of Resilient’s results going back as far as 2004 shows this is the first time the company has reported lower dividends. Although the decline in its dividend was marginal at 0.3%, it’s a blow for a property group that has been a market darling.

The decline is expected to continue in 2019, with De Beer saying he expects dividends to be at least 2.6% lower. This is in stark contrast to his earlier expectations at the interim results in February, when he forecasted growth of at least 12% for 2019.

He didn’t respond to Moneyweb’s request for comment.

Why bearish dividend outlook?

You don’t have to look far for reasons behind Resilient’s change in tune. The company was forced to make changes to how it calculates distributable income (a source of dividend payments) after conceding to questionable accounting practices that artificially boosted its dividend payments.

A number of highly critical reports by asset managers 36ONE and Mergence, stockbroker Navigare, and independent sell-side research house Arqaam Capital accused Resilient of using other sources of income to boost its dividend payments. The scathing reports have taken a toll on its share price, which has fallen by 61.06% so far.

Real estate investment trusts (Reits) usually pay dividends from rental income. Resilient went a step further, 36ONE said, by including the interest earned from loan repayments to it from its black economic empowerment partner, the Siyakha Trust, which holds 9.9% of Resilient’s shares.

De Beer initially rejected allegations emerging from the reports, saying Resilient doesn’t control the Siyakha Trust as it has a separate board, nor does Resilient have exposure to variable returns from the BEE trust.

However, in a U-turn in May, Resilient admitted it does control the trust, as it has exposure to its variable returns and can influence income earned from it.

It also precipitated a process by Resilient to restate its financial results. Siyakha Trust will be a dedicated BEE ownership vehicle for Resilient and interest earned on loans will be recognised separately from distributable income.