Secure Income hikes dividend target amid good rent performance

Secure Income REIT reported an 11.8% uplift in EPRA net tangible assets per share to 424.1p in its final results on Thursday, as it hiked its dividend targets on the back of a return towards pre-Covid rents.

The AIM-traded real estate investment trust said its investment property valuation was up 9.3% over the year ended 31 December, and up 7.1% since the end of June.

Its net initial yield ended the year at 5.1%, however, which was down from 5.4% at the end of the 2020 financial year.

Secure Income completed rent reviews on 77% of its portfolio in the year, resulting in a like-for-like rental increase of 3.1%.

The company’s weighted average unexpired lease term (WAULT) increased by around 50% over the year to 30 years, following the regearing of its Merlin leases.

It reported a 400% increase in adjusted EPRA earnings per share to 17.5p, adding that like-for-like earnings were ahead 10% as rents returned to their pre-pandemic course, following the expiry of all temporary rent reductions.

Looking at shareholder returns, Secure Income reported a total accounting return of 15.8% in the year, with total shareholder returns of 46.7% over the 12 month period, and of 15.3% per annum from the time of its listing to 8 March.

Its net loan-to-value ratio narrowed to 33.8% from 36.4% at the end of 2020, and its EPRA cost ratio of 12.6% was “among the lowest” in the UK REIT sector.

Looking ahead, Secure Income increased its targeted July dividend of approximately 15%, to an annualised 18.2p per share.

The board said that was driven by the return of rents to their pre-Covid trajectories, together with targeted earnings enhancements from the Merlin refinancing, and current expectations of high inflation, which would translate into increased rents in the near-term.

It said the increase assumed no change to the portfolio, or material change to tenant circumstances.

“In 2021 we delivered a total accounting return of 15.8%, in line with our long term returns since listing in 2014,” said non-executive chairman Martin Moore.

“Our rents have not only resumed their pre-pandemic path, but future income expectations are now higher due to rising inflation.

“Following the major regearing of our valuable Merlin leases to 55.5 years without break, the company's WAULT at 30 years is now the longest amongst the major UK REITs.”

Moore said that since the year-end, the refinancing of its Merlin debt at a lower loan-to-value and a lower cost was expected to help boost its targeted dividend by an estimated 15% by the summer.

“Notwithstanding the uncertainty caused by the awful humanitarian crisis and geo-political events in Ukraine, these elements combine to form a strong platform for the year ahead.”

At 1219 GMT, shares in Secure Income REIT were up 3.17% at 423p.