Growthpoint's equity issue will place c.10% of their shares but only shave off c.2% of their debt. Hence, it is quite obviously massively dilutive. Couple that with a collapse in their payout ratio (100% ~ at least 75%) & forward yield is looking rather rubbish.
After selling assets, negative rental reversions, vacancies & so on are taken into account, Growthpoints forward distributable earnings are likely lower than the past. Add in a 10% dilution from this equity issue. Add in a further -25% drop in the payout ratio...
...& suddenly Growthpoints stable SUSTAINABLE forward distribution is probably resetting itself to somewhere around HALF of what it historically has been.
Pre-COVID 12m distribution per share was 218.3cps. Halved, this is 109cps. On Growthpoints share price of 1374cps, this makes a yield of 7.9%. SA Govi 10year bonds are trading on a 8.86% yield. Therefore, why not just buy SA govi bonds? Less risk, more yield.
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