The Dexus Property Group (ASX: DXS) share price is edging slightly higher to $8.53 this morning after the company released its FY20 earnings results.
Dexus is one of Australia's largest Real Estate Investment Trusts (REITs) and the largest owner/manager of office buildings. As such, its results will likely be used as a performance barometer for the commercial and industrial property sector.
Commercial property has been savaged by the COVID-19 pandemic this year, particularly as the shift to working from home has left many office buildings vacant.
So how is the Dexus share price faring in this period of economic uncertainty?
FY20 performance
Dexus reported a net profit of $983 million for FY20, a 23.3% drop compared to the previous financial year. This was largely due to lower revaluations of property assets undertaken by the company compared to FY19.
The property group maintained rent collections at 98% for FY20, although this dipped to 92% in the fourth quarter. As of 30 June 2020, office occupancy was 96.5%, which is lower than the 98% seen a year prior.
Despite the lower results, Dexus will pay a final dividend of 23.3 cents per share, taking its full-year dividend to 50.3 cents per security. This represents an attractive yield of more than 5% paid out to shareholders.
Dexus CFO Alison Harrop said the group enhanced its financial position by sourcing $1.85 billion of debt, including the issue of $700 million of 10 and 12-year medium-term notes. That increased debt duration to 6.9 years and further diversified funding sources.
"In this uncertain environment, we remain focused on maintaining the strength of our balance sheet," she said.
Dexus also maintains a sturdy $1.6 billion of cash and undrawn debt facilities. The property group provided no guidance for FY21 due to the current economic uncertainty.
Should you invest?
With the Dexus share price reaching an all-time high of $13.51 in February of this year, COVID-19 has put a large hole in its current price performance. The group's prominent exposure to office property is largely to blame for this.
I do like that the company maintained its dividend yield despite the pandemic. But with so much future uncertainty, I have my doubts about how well the Dexus asset portfolio can hold up in FY21.
In contrast, property competitors like Goodman Group (ASX: GMG) have thrived in recent weeks due to their exposure to warehousing and industrial property. This is a by-product of the unprecedented growth in e-commerce, leading to Goodman reaching an all-time high of $18.51 this week.
If I was trying to diversify my portfolio and gain some exposure to property, I'd look at a REIT like Goodman due to its quality industrial portfolio, rather than Dexus' plentiful dead weight of office buildings. On this basis, the Dexus share price is just a watchlist item for me right now.
Foolish takeaway
The Dexus share price performance may hinge on how soon large numbers of people return to the office. With such an attractive dividend yield, a buy and hold strategy may be an option. A COVID-19 vaccine could make all the difference for a return of bustling Australian cities once more.
