Investing in Swiss real estate companies: a good idea for the dividend-oriented investor?

Parmi les sociétés suisses dont les rendements du dividende sont les plus élevés, les sociétés immobilières - actives dans la gestion (achat/vente, location) de propriétés commerciales, résidentielles et/ou industrielles - figurent en bonne position. En effet, le rendement moyen des six sociétés immobilières les plus fortement capitalisées est actuellement de 4.80%, soit bien supérieur au rendement des ténors du SMI tels que Nestle (3.14%), Novartis (3.21%) ou Roche (2.95%). Par ailleurs, alors que les cours du SMI s'envolaient en moyenne de 20% durant l'année 2013, l'on assistait à une chute moyenne de 9% des six sociétés en question. Bien qu'inférieur au rendement affiché par certains Real Estate Investment Trusts  (REITs) aux USA, tel que Omega Healthcare Investors Inc. (OHI) et ses 6.4% actuels, le rendement des sociétés immobilières suisses a de quoi donner l'eau à la bouche. Le présent article s'efforcera d'évaluer l'intérêt de ces sociétés pour l'investisseur fondant son approche sur les dividendes et leur croissance.

The six real estate companies in question, their capitalization, and the amounts of dividends paid for the fiscal years 2002 to 2012 (taken from finanzen.ch) are shown in the following table:      

Note that most companies have a limited dividend history and some have a tendency to pay dividends of a consistent amount year after year. In the remainder of the article, companies are compared on some of their financial fundamentals as well as dividend ratios.

Volatility des cours (beta), profitabilité et dettes

The stocks all have lower volatility than the market (Figure 1), constituting defensive stocks. On average, the beta is 0.33.

Figure 1. Price volatility (beta index).

On the other hand, disparities appear in the ability of companies to create value as indicated by their return on equity (ROE) ratio (Figure 2). Specifically, PSP, SPS and IS display returns almost twice those of MOB, ALL and WAR.

Figure 2. Return on equity (ROE).

All six companies have taken out loans to finance their activities (Figure 3). However, PSP has a much lower debt-to-equity ratio than the other five companies. It is worth noting that none of the companies appear to be excessively indebted.

Figure 3. Rdebt/equity ratio (total debt/total equity).

Dividends

The dividend yield (Figure 4) is roughly between 4% and 6%, with the highest yield currently being offered by IS.

Figure 4. Dividend yield.

Les ratios de distributions, qui constituent une condition de la pérennité des dividendes, varient fortement (figure 5). En effet, si PSP ne verse que le 40% de ses bénéfices, ALL en a versé l'équivalent de 188% pour l'exercice 2012. Il va sans dire qu'un tel dividende est en danger de réduction. L'autre société dont le distribution ratio est élevé, WAR, risque de ne pas être en mesure d’accroitre le montant des futurs dividendes. Une croissance des bénéfices pourrait cependant permettre une augmentation des futurs dividendes.

Figure 5. Payout ratio.

The valuation

In order to assess the valuation of the six companies, two ratios were used. On the one hand, the price-earnings ratio (PE) (Figure 6) and on the other hand, the comparison of the book value to the share price (Figure 7). WAR is, according to both indicators, overvalued. On the contrary, PSP would be undervalued by around 8% if we stick to its book value and the company is comparatively the cheapest according to the price-earnings ratio. IS has a price-earnings ratio below average, but an overvaluation of almost 29% according to its book value.

  Figure 6. Price-earnings ratio (PE).

Figure 7. Difference (expressed in %) between book value per share and share price.

 Conclusion

Dans l'ensemble, les résultats sont plutôt décevants pour l'investisseur orienté "dividendes": malgré un rendement relativement élevé, il semble que ces sociétés ne soient pas en mesure ou ne visent pas à verser des growing dividends. Les dividendes sont (au mieux) constants, sinon leur montant est passablement fluctuant, leur versement interrompu ou leur historique bref. A titre d'exemple, bien que IS verse  un dividende sans faute depuis 2003, le montant de celui-ci s'est accru dans un premier temps, puis il a été réduit et finalement il est constant depuis 2007. Malgré ceci, le rendement de 5.97% et le ratio modeste cours-bénéfice font de IS la société qui constitue, à mon avis, la meilleure option actuelle. Attention cependant à la survalorisation selon la valeur comptable.

PSP could prove to be an interesting stock for the value investor. Indeed, the company has good fundamentals (return on equity and debt) and the most attractive valuation among the six companies analyzed. If the payment of a dividend were to continue (first payment relating to the 2011 financial year), then this would be an additional positive point. On the page investor relations, it is written on this subject: "PSP Swiss Property SA plans an annual distribution of at least 70% of the consolidated profit of the financial year excluding results from buildings. PSP Swiss Property aims to guarantee a sustainable evolution of dividends (...)."

The profits of these companies are of course dependent on interest rate fluctuations. It could therefore be wise to position oneself on such securities during a period of increasing rates, given that this will lower prices. Finally, there are many real estate funds that offer regular returns and possibly preferable alternatives to the securities of the real estate companies analyzed in this article.