Steady business performance ensures dividend security despite generous payouts
Klépierre, an $11.8 billion leading shopping center specialist in Europe, exhibited an attractive 5.2% dividend yield with 48% payout ratio.
The 27-year-old Paris-based company with property portfolio made up of 156 shopping centers in 16 countries of Continental Europe recently reported its first half operations.
In the recent six months, Klépierre reported 1.3% (vs. 3 year ave. 6.4%) higher gross rental income to € 611.7 million and a 3.8% (vs. 3 year ave. 181.2%) rise in profits to €570 million—representing a very profitable margin of 93.2%.(vs. 3 year ave 44.5%).
Klépierre records significant profits brought by its income in ‘change in its value of investment properties,’ which was at €400.5 million in the first half compared to €398.4 million a year earlier.
In review, Klépierre experienced steady growth in all of its businesses in the Europe region except for its business in Scandinavia and Germany, ~20.7% of total unadjusted gross income.
The property specialist also recorded a cash position of €461 million and €9.67 billion in debt with debt-equity ratio of 0.98 times (vs. 1.85 times a year earlier). In the period, overall debt fell by €194 million while equity rose €4.52 billion to €9.86 billion.
Klépierre’s cash flow from operations in the first half rose 4.5% year over year to €531 million, capital expenditures were €140 million leaving the company with €391 million in free cash flow (vs. €358 million a year earlier). Dividend payouts represented 143.7% of free cash flow (vs. 71.7% in the past three years).
Klépierre also was a net debt payer in the past three years having reduced overall debt (plus other financing activities) by €2.65 billion. Accumulatively, it also generated €1.7 billion in free cash flow and provided €1.23 billion in dividend payouts.
Meanwhile, analysts have observed that Klépierre has fallen 21% in the past year, and fear that Amazon (ticker AMZN) would further impact overseas sentiment and operations of traditional retailers.
Analysts also have an overweight recommendation on Klépierre with a target price of $41.72 a share vs. $38.35 at the time of writing. Applying past P/S multiple average, 15% margin, and average revenue estimates for this fiscal year indicated a per share figure that would be 11.7% lower than today’s share price.
In summary, Klépierre is a hold right now and trading at its value.
Disclosure: I do not have shares in any of the companies mentioned.