These three stocks may well be the most overlooked dividend plays on the ASX. Sporting market caps of more than $1 billion each, the companies pay dividend yields of 6.9%, 7.5% and 7.7% respectively.
What will probably not surprise many investors is that all three are property trusts, or A-REITs as they are now referred to. While the dividend yield on all three is unfranked, by virtue of their business, the companies have the ability to pay steady high dividends. Two also have the ability to increase their payout ratios, thereby increasing dividend payments.
So let’s take a quick look at each one.
Abacus Property Group (ASX: ABP) has a market cap of $1.2 billion and primarily invests in commercial, storage, industrial and retail properties. Rental income is the largest contributor to earnings, mostly sourced from 97 investment properties valued at $1.33 billion (higher than the current market cap). Abacus is aiming to pay out 16.75 cents per share in 2014, putting it on a dividend yield of 6.9% (unfranked), although the company has scope to increase its dividend payout ratio.
Growthpoint Properties Australia Ltd (ASX: GOZ) holds a portfolio of 49 industrial and office properties with a total value of approximately $1.8 billion, well above the current market cap of $1.2 billion. The companies major clients include Woolworths Limited (ASX: WOW), GE Capital Finance, Linfox, Commonwealth Bank of Australia (ASX: CBA) and Star Track Express. Growthpoint had a successful six months to December 2013, is paying a 7.7% unfranked dividend, and has increased dividends (distributions) every year over the past 5 years.
Cromwell Property Group (ASX: CMW) reported a 194% increase in statutory profit for the six months to December 2013. The company manages 32 commercial properties around Australia, including management of Qantas Airways Limited’s (ASX: QAN) global headquarters in Sydney, and 48% of rental income comes from government related entities. Cromwell has confirmed that it expects to pay 7.5% yield this financial year, which could rise if the company continues its winning form.
Don’t be misled by the dividends for these three companies being unfranked. While they may appear less attractive than those of say the big four banks, these three companies are much lower risk than the banks, back by real assets and worthy of adding to your watchlist.