This morning the BWP Trust (ASX: BWP) as the real estate investment trust behind many of the Bunnings Warehouse Home Improvement properties reported a half-year profit of $56.4 million on revenues of $76.9 million. The profit and revenue were up 1.7% and 2% on the prior corresponding half.
Including accounting valuation gains on investment properties the profit was up 41% to $103.4 million.
Thanks to the $56.4 million distributable cash profit shareholders will receive dividends of 8.78 cents per unit, which represents a payout ratio close to 100% of cash earnings.
For the second half of the year the group "expects to maintain distribution growth at 1.7 per cent". As such the shares offer an unfranked yield of 6% when changing hands for $2.82 this afternoon.
The interim dividend will be paid on February 23 to shareholders on the register as at December 29, 2017.
The group's net tangible asset backing per unit stood at $2.82 which suggests the stock is trading at fair value.
BWP Trust has $155 million in drawn bank debt with the Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC), alongside $310 million in debt issued via five-year fixed term corporate bonds due in May 2019 and 2022. As at the end of 2017 the annual cost of debt was recorded at 4.7%.
Gearing or total debt divided by total assets stood at a moderate 19.7% with total debt of $465.5 million versus assets of $2,353 million.
Total income for the period was $76.9 million, with finance costs of $11 million and operating expenses of $2.9 million eating into the final cash profit handed out to shareholders.
Foolish takeaway
Given its moderate but defensive growth outlook, BWP Trust looks a reasonable option for income seekers in the retirement phase looking to beat the feeble returns on cash.
However, I can't helping thinking that it may be possible to gain marginally better returns than 6% elsewhere when taking on a similar amount of risk in the REIT investment space.