Fibras (Mexican REITs) dividends for the second quarter of 2016 were –in general–, similar to the previous quarter, although there were differences case by case. The average dividend for thw10 Fibras was 6.7% in the second half which was very similar to the 6.6% paid the previous quarter and above the average of 5.4% paid in 2015.
The range of dividends for the second quarter was very broad. Fibras’ dividends werebetween 5.00% paid by Fibra UNO (FUNO) and 7.99% paid by Fibra Terra (TERRA). The most attractive and above average, in addition to TERRA, dividends were Fibra Macquarie (FIBRAMQ) which paid 7.97%; Fibra Prologis (FIBRAPL) with 7.75% and fibra Monterrey (FMTY) with 7.03%. At the other extreme, dividends below average were for Fibra SHOP (FSHOP) with 6.60%; Fibra Inn (FINN) 6.42%; Fibra HD (FIBRAHD) 6.38%; Fibra Hotel (FIHO) 6.08%; Fibra Danhos (Danhos) 5.89% and Fibra UNO (FUNO) 5.0%.
In all cases the dividend was divided by the closing price of the Fibra at December 31, 2015 for comparative purposes, but each investor has its own dividend depending on the price at which s/he acquired the Fibra.
Considering that the recent issuance of debt by Danhos at 3.5 years and rated AAA pays a rate TIEE + 65 basis points equivalent to 5.23% it can be said that the dividends Fibras pay are good, where the risk is the volatility in the price.
Reviewing the performance of the Fibras in 2016, it can be seen that 5 Fibras show a positive behavior, one kept its price unchanged and 4 show accumulated losses for the year (to July 31, 2016) . This result for the Fibras is better when you consider that in 2015 the industry performance was negative reflecting a contraction of 9% where only 2 out of 10 had a positive performance in 2015.
The Fibras with positive performance in 2016 are: FIBRAPL (13%); TERRA (11%); FIBRAMQ (10%); FMTY (4%) and FUNO (1%). Fibra HD did not change in price. Moreover, the Fibras with losses in their contributions accumulated in the year (to July 31) are: FIHO (-14%); FINN (-11%); DANHOS (-4%); and FSHOP (-1%).
From our point of view the factors that explain the performance of the Fibras are: The expectation of rising rates; reopenings and increased indebtedness (debt issues).
When rates go up investors demand higher returns from the Fibras and this lowers their price. Higher rates also mean higher costs to finance purchases and this puts pressure on margins. To the extent that higher increases for local interest rates portend this will be a limiting factor in performance.
Dividends generate stable income. Incomes rise with inflation or with the movement in the exchange rate, but the increase in income depends on how the contract was set.
Another point to consider are reopenings and debt. Fibras seek economies of scale and thus seek more resources be made either through reopenings or greater debt. When resources be made by any of these mechanisms there is a period of time in which the money has not been put into real estate and this affects the performance of the Fibras and the dividend.
In the last 5 years Fibras in Mexico have emerged as an alternative investment. 8 of the 10 Fibras on the market have resorted to reopening (exceptions are DANHOS and PROLOGIS); while 4 of 10 (FUNO, FSHOP, FINN and DANHOS) have used debt issuance in the market in order to grow their resources.
If the Fibras are analyzed according to their specialization it can be seen that the ones that are diversified in at least two of the three sectors involved are those that have offered better results (industrial, commercial and offices). Those specialized in the industrial sector have been performing well, Which is not the case for those specializing in hotels and shopping centers.
Column by Arturo Hanono