If you've never heard of BWP Trust (ASX: BWP), you're not alone.
Yet the $2.7 billion real estate investment trust (REIT) leases buildings to one of Australia's best known, and most successful retailers, Bunnings Warehouse.
Most Australians will have visited a Bunnings Warehouse, and not just for their snags. Though, with a your home improvement and outdoor needs stacked in your trolley, it's hard to bypass the sausage sizzle. Especially if you have kids in tow.
Image source: Scott Phillips
What does BWP Trust do?
BWP Trust is an ASX REIT that invests in and manages commercial properties across Australia. The majority of its properties are leased to Bunnings Group Limited, which you'll know as Bunnings Warehouses. Bunnings is a wholly owned subsidiary of Wesfarmers Ltd (ASX: WES).
Wesfarmers also owns around 25% of the issued shares in BWP Trust. BWP shares first began trading on the ASX in 1998.
BWP's share price benefits from reliable income stream
Many landlords of brick and mortar retailers have been struggling to collect the rent this year. That's one of the primary drivers that's seen shopping centre owner and developer Scentre Group's (ASX: SCG) share price tumble 42% this calendar year.
But with Bunnings Warehouse leasing the majority of its properties, BWP Trust hasn't had this issue.
For an idea of just how well Bunnings is performing, I'll quote the Motley Fool's own Scott Phillips, who on Monday wrote:
Bunnings numbers are truly out of this world. Numerically, I think it's fair to say Bunnings is the best retailer in the world. If that seems like a big call, it is. But it's not hyperbole.
In the most recently completed financial year, Bunnings' earnings were up 14%. It was the best performing unit in parent Wesfarmers' portfolio. Its return on capital was an astonishing 61%.
That is, for every $1 of assets in the business, Bunnings earned 61c… The year before, it was 51c.
(To be fair — and to Wesfarmers' credit, the company was clear to disclose this — the 2020 ROI was favourably impacted by lower working capital at year end, this year.)
The quality of its primary tenant is reflected in BWP Trust's share price. Despite falling 33% from 20 February through to 23 March during the COVID-19 driven market rout, BWP's share price is up 5% year-to-date.
That compares to an 8% loss of the wider S&P/ASX 200 Index (ASX: XJO).
BWP Trust also paid both of its dividends this year for an annual dividend yield of 4.4% at the current share price.
