The Scentre Group (ASX: SCG) share price has popped today after the Westfield owner gave a market update to investors before the bell this morning.
Scentre shares closed at $2.22 on Friday afternoon, but opened at $2.26 this morning and are sitting at $2.28 at the time of writing – a 3.18% bump.
Scentre cancels interim dividend
Well, let's get the bad news out of the way first: Scentre has officially cancelled its 2020 interim dividend distribution. Here's how the company justified its move in the ASX release this morning:
"Given the uncertainty regarding the pandemic, its duration, the economic impact and the timing of operating cash flows for the Group, the Group has determined to not pay an interim distribution for the Half Year period ending 30 June 2020. The Group believes that retaining this capital will further strengthen its financial position and ability to continue to deliver long term returns to its securityholders."
Although this was a move most investors had braced themselves for, it will no doubt still be a painful pill to swallow. Many investors buy into REITs (real estate investment trusts) like Scentre for dividend/distribution income, so the absence of this income from Scentre shares isn't negligible.
What else did Scentre tell us?
You may have noticed that the Scentre share price has risen substantially today, so the news out of this REIT can't be all bad. Scentre did also inform the markets that its capital position was healthy with increased liquidity to $3.1 billion, and it has managed to retain its 'A' grade credit rating.
The company also told markets that 57% of its retail tenants, representing 70% of the gross lettable area, remain open, with "more retailers scheduled to reopen over the coming weeks".
Scentre also noted that "as more retailers have reopened, we have seen an increase in customer visitation in recent weeks and most significantly over this last weekend there was double the level of visitations from 5 weekends ago".
All of these developments point to Scentre recovering once restrictions are lifted across the coming months, and it might not look like the retail apocalypse for the company that many feared a few months ago.
This is reflected in the current Scentre share price, which although is still a long way away from the ~$4 levels we were seeing early in the year, is still far above the $1.35 low we saw in March.
The next few months will still be crucial for this ASX REIT, however, and we shall have to see how this company pulls itself out of the woods when the coronavirus is, at last, behind us.
