Looking for HYP Retailers

[AJC5001]

Unless divi has to come direct from a retailer, how about indirectly? in which case HMSO (Hammerson, which is purely retail) currently yields 6.94%.

Their recent results didn't look good, though. https://www.investegate.co.uk/hammerson-plc--hmso-/rns/final-results/201902250700079379Q/

"Shareholders have raised concerns about Hammerson’s performance after it spurned a £5 billion takeover by rival Klepierre SA last year. It also pulled out of buying smaller rival Intu Properties Plc after concerns over higher exposure to Britain’s struggling retail sector. "
https://uk.reuters.com/article/uk-hamme ... KKCN1QE0S9

Adrian

[SlickMongoose]

Most retailers I consider to be uninvestable. Tiny margins, no USP, and very tough competition. Most of them have a decent chunk of debt as well.

PETS I think has something going for it with the range of services offered.

Games Workshop (GAW) might be worth a look. The share price has gone up a bit since I wrote the below (yield about 4% currently). It's about as far from traditional retail as it's possible to get, which I consider a big plus but possibly not what you're after.

Games Workshop has recently dipped into what I think counts as HYP range (currently a 4.6% yield). It's certainly something different from the usual shares discussed here, anyway.

+ Quarterly dividend (well I consider this a plus anyway!).
+ Very strong balance sheet with no debt.
+ Unique products and a fanatically loyal customer base.
+ High margins and high ROCE make them highly cash generative.
+ Growing (interim trading update in Dec stated revenue up 14% and operating profit up 6%).

- Lack the long history of growing dividends of a great HYP share - They've had a couple of years of incredibly strong performance recently but before that they were stagnant for a long time.
- Dividend policy is "to return all truly surplus cash to shareholders", so no management commitment to progressive (or even stable) dividends.
- Some concern over whether the current level of trading is likely to continue or whether it's temporary. Personally I think the rise of social media, gaming and "nerd culture" has given them an enormous boost.

[Arborbridge]

Unless divi has to come direct from a retailer, how about indirectly? in which case HMSO (Hammerson, which is purely retail) currently yields 6.94%.

Otherwise I wouldn't touch retailers including supermarkets with a bargepole. They're all heavily into keeping up appearances by reducing costs and the reducing divi is another way to maintain survival. With M&S slashing the divi by 40% just to fund investing in the development of its business, it won't be long before other quoted retailers looking to reduce money going out see that as a useful precedent.

HMSO is under presssure because the retailers they depend on are in difficulty. Personally, I wouldn't buy into a property group which is so dependent on the health of retail.

Arb.

[brightncheerful]

HMSO is under pressure because the retailers they depend on are in difficulty.

I don't agree. HMSO is under pressure because demand for shopping centre investments has tapered off and valuers have increased the yield. Much 'capital growth' is recent years has stemmed from yield compression, rather than commercial property fundamentals. Yes, some retailers are in difficulty but only a minority. The majority are doing ok and some are still expanding. The challenge for shopping centre investors is that retailers nowadays prefer shorter leases which is more of a management hassle. If you read HMSo's report you'll find plenty of new lettings at rents that show a small increase over existing, Snag is that the increase are not feeding through to rent reviews in existing leases.

[Arborbridge]

HMSO is under pressure because the retailers they depend on are in difficulty.

I don't agree. HMSO is under pressure because demand for shopping centre investments has tapered off and valuers have increased the yield. Much 'capital growth' is recent years has stemmed from yield compression, rather than commercial property fundamentals. Yes, some retailers are in difficulty but only a minority. The majority are doing ok and some are still expanding. The challenge for shopping centre investors is that retailers nowadays prefer shorter leases which is more of a management hassle. If you read HMSo's report you'll find plenty of new lettings at rents that show a small increase over existing, Snag is that the increase are not feeding through to rent reviews in existing leases.

You could be right, in that if one judge's this is the weakest point, then now could be a good buying opportunity. There's a lot of bad news about concerning shopping centres and shops struggling to pay rents, and revolts against rent reviews. So putting a contrarian hat on could be a good idea, provided one is not too early in the game. And investing in those who hold the property for a wide slice of retail, rather than in any one particular retail outlet, does feel intuitively safer.

Arb.

[brightncheerful]

provided one is not too early in the game

I missed out. HMSO were £3.13 low earlier this year - I thought of buying when it was £3.20 on yield 7% but bought LLOY instead. HMSO now £3.888