forrado wrote:77ss wrote:A special case maybe, but it interesting to note that BCPT's dividends were covered over 2 times by their 'Revenue Reserves'.
I have to take issue with you, how do you get this over 2 times cover from revenue reserves when the Chairman states in yesterday’s release of the Annual Financial Report for 2019 that can be read at …
https://www.investegate.co.uk/bmo-com-pty-tst-ltd--bcpt-/prn/results-for-the-year-ended-31-december-2019--audited-/20200416070000P63B0/Dividends and Dividend Cover
The Company’s level of dividend cover for the year (excluding capital gains on properties) was 81.8 per cent. This was marginally higher than the 80.2 per cent cover achieved last year.
The over 2 times cover my well be accurate if one includes capital gains on properties, but that is not the amount of cash being held in the trust’s revenue reserve account. 81.8% is only enough to cover the dividend for 10 months.
If one takes the trouble to read the report in its entirety, and particularly the accounts, then one will see …
During 2019 the trust paid out to shareholders dividends totalling £47,962,000
That is £4-million per month
During 2019 the trust received rents totalling £64,380,000
That is £16-million per quarter
At the end of 2019 the trust had £39,249,000 in reserve to cover dividend payouts
That is 10 months cover at £4-million per month
As things presently stand, the problem for the trust is that £16-million of rent due during this current second quarter of the year is expected to be down 25% or maybe more. While the £16-million rent collection prospects for the third quarter of this year don’t look any better. So, I would think until the Board has a clearer idea as to how much of that £32-million rent due for the combined second and third quarters of this year will actually be paid it is prudent to temporary suspend monthly payouts to shareholders. Otherwise, doing nothing could seriously drain the revenue reserves depending on how bad it gets - which is the big unknown.
I wouldn’t be surprised when the Board thinks it safe to restart payouts to shareholders the trust switches from a monthly to a quarterly payout timetable. I also think there is a strong possibility in the short-term that shareholder payouts equalling £4-million per month will be reduced. Exactly by how much is anybody’s guess at this point in time.
I think we are taking about different things, both of us being equally right (or wrong). You are referring to dividend cover as a function of rental income - which is a perfectly sensible way of looking at things. I am referring to dividend cover as a function of the Revenue reserve as given in the accounts. Dividends paid out £47,962,000; Revenue reserve £99,101,000.
What I was really getting at is that the comforting notion that an IT's Revenue reserve enables it to continue paying dividends in tough times may be a delusion. So I found this to be a useful example.