One of the great things about being a British investor is the wide variety of foreign listings the London Stock Exchange attracts due to its reputation, high liquidity and the UK’s law code. While many of these foreign listings are of multinational behemoths, a few of the smaller ones such as German Sirius Real Estate (LSE: SRE) and Brazilian maritime services firm Ocean Wilsons (LSE: OCN) are eyecatching income options in this low-yield world.
Teutonic stability
Sirius announced full-year results this morning and rewarded shareholders with a 32% year-on-year (y/y) increase to its dividend so that the shares now yield a hearty 4.3%. This increase was more than matched by rising profits and earnings per share of 4.25 cents nicely cover the dividend payout of 2.92 cents per share.
The company’s stellar forward momentum has been driven by very impressive domestic economic growth that has steadily increased demand for the business parks Sirius purchases, invests in and flips for a profit when mature.
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In the year to March the group notched up a 23% y/y rise in total income to €68.8m due to acquisitions and a very healthy 5.1% increase in like-for-like rental income. Management has also continued to actively manage the portfolio and made €153.2m in purchases during or shortly after the year-end period and disposed of €110.4m worth of properties.
As the German economy picks up steam the group is benefitting not only from rising rents, but also steadily appreciating property values. Last year saw an 8.5% like-for-like rise in the valuation of already-owned properties and a full 11.2% uplift in the value of recently acquired properties. Together this gave the company’s portfolio a year-end book value of €823m and kept its gross loan-to-value ratio a decent 42.3%.
The downside for would-be investors is that Sirius’s well-run business model and the healthy German economy have sent the company’s shares on a stellar run so that they now trade hands at a full 16 times forward earnings. This is simply too lofty a valuation for a real estate company to make me comfortable enough to purchase shares.
A tad too risky?
On the other side of the world, investment holding firm Ocean Wilsons provides shareholders with a very nice 4.8% dividend yield that last year was covered two times by earnings. The company’s main asset is a large stake in the similarly named business that engages in maritime services in Brazil.
That business is a well-run one and last year coped well with lower shipping volumes into and out of Brazil due to the poor macroeconomic environment. During the period the company’s profits rose from $29.3m to $80.7m, but this was down almost entirely to the appreciation of the Brazilian Real. But management being able to maintain operating margins shows the underlying business is sound.
However, Ocean Wilsons is still a tad too risky as an income share for me to commit money to it. This is down to the high volatility of the Brazilian economy, the Real depreciated a full 20% y/y in Q1 alone, and the fact the company also owns an investment portfolio worth some $253.2m. This diversified structure and reliance on the health of a highly corrupt, politically unstable developing country leads me to look elsewhere for my income shares.
