Is the BHG Retail's 7.2% yield a good buy?
Source: BHG Retail REIT homepage
Key Highlights:
BHG Retail is going to trade Ex-dividend
The annualised indicative yield is 7.2%
Does it worth to buy this dividend stock?
BHG Retail REIT is going to trade ex-dividend after 6th of September. Does it worth to buy the dividend stock or would it be a potential corporate action play?
Perhaps, the insider trading last week could give us some hints on this.
BHG Retail REIT was pop up as the top institution net sell last week.
Source: SGX
One of its top institution investor, China Merchant’s Bank Asset Management has reduced its holdings by almost half last week, which also means that China Merchant’s Bank Asset Management is willing to give up some dividends for the upcoming payout. Its total shareholdings was reduced to 9.3% from 16.74% previously.
Source: Shareinvestor
Source: BHG Retail REIT Annual Report
What are the potential reasons that the institutional investor is selling the shares?
1. US-China Trade War
The uncertainties caused by the US-China Trade War is one of the key reason that impacts the REITs. RMB has been volatile since the Trade War. With all its earnings generated in RMB, but the dividend payout will be in Singapore Dollars, the volatilities of RMB may affect its payout moving forward.
2. Flat earnings and dividend payout
BHG Retail REIT is unable to generate earnings or dividend growth in the past 3 years. With an occupancy rate of 99.9% and the slow down in economy, there is hardly any upside on its rental income. Besides, the reduction of distribution waiver by sponsor, trading with an enlarged unit base (+14%) and payment of management fees in units are the key reasons that contributed to the drop in dividends per share.
With the current economic backdrop in China, and choppy performance of the BHG Retail REIT, we will not consider it as one the dividend stocks in our REITs portfolio.
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