Property trust outlook brighter


Real estate investment trusts, such as Westfield, Stockland and GPT, have been on the nose with investors since the global financial crisis (GFC).

They were once a key component of any diversified portfolio, however in recent times have struggled along with the real estate market and the retail sector.

If you are a long-time investor who still has a solid holding in these companies, it may be the time to consider averaging down on your investment.

Why? Because I've seen enough this week come from sector leader Westfield to suggest the worst may be over for this much maligned sector.

Last week Westfield (ASX Code: WDC) confirmed its full year earnings and distribution guidance, saying it still expected to pay a distribution of 48.4c per security for calendar year 2011.

The Westfield dividend is historically unfranked because it earns the majority of its income overseas, however at current prices this dividend represents a respectable 5.8 per cent yield.

Westfield, under the management guidance of Steven and Peter Lowy after Frank stepped down from operational responsibilities in March this year, is continuing with pre-development activity on $11 billion worth of development work, and expecting to start more than $750 million of new projects in 2011.

This number will rise to $1.25 billion worth of new projects in 2012 and $1.5 billion in 2013.

The other reason that Westfield is starting to look attractive is the chart. Westfield looks to have double bottomed at the $7.20/share level in September and again in early October.

More recently the stock appears to have broken the long-term downtrend that has been in play since February, which is a bullish technical indicator. Now Westfield has a very long way to go before it returns to anywhere near its pre-GFC levels, and with the world still de-leveraging it can be argued that it won't in the foreseeable future, which is why for those investors in the stock at much higher levels may wish to consider averaging down to at least give themselves a fighting chance of recovering their previous losses.

It should be noted that above I am talking about the Westfield Group (WDC), rather than the Westfield Retail Trust (WRT).

In December 2010, the Westfield Group divested its Australian holdings into the Westfield Retail Trust (ASX Code: WRT).

Last week, WRT confirmed its full year 2011 distribution forecast of 16.5c/share, which is in line with the forecasts made in the demerger documents back in November 2010.

At current prices this equates to a yield of 6.5 per cent (unfranked) for the Australian arm of the business.


_Information contained in this article does not consider your personal circumstances. You should consult a stockbroking professional before making any investment decisions. Sentinel may hold positions in stocks discussed from time to time. _

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