Talking Point 

Schroders vows to increase £498m Reit dividend

Schroders vows to increase £498m Reit dividend

The board of the £498m Schroders Real Estate investment trust have said they expect to increase the dividend paid by the fund following the refinancing of its long-term debt.

The trust has a current yield of 4 per cent and recently completed the refinancing of a £129.6m loan from Canada Life and a £20.5m credit facility from Royal Bank of Scotland (RBS).

The refinancing is at a lower rate of interest, and the new loans are due for repayment at a later date than the previous loans.

Investment trusts, unlike open-ended funds, are allowed to borrow and deploy the capital into investments.

If the investments are well chosen, this enhances the returns available to investors.

In a statement to the stock exchange, the board of the trust said the decision to refinance the debt was taken in order to protect the trust from rising interest rates.

On the potential for a dividend increase the board of the trust stated: "The successful refinancing combined with contemplated acquisitions should allow the board to consider the company's ability to progressively increase the level of dividend."

Ben Yearsley, director at Shore Financial Planning, said: "We have had a few years of good returns overall for commercial property, largely driven by the trend of industrial and logistics and I don't see the excellent returns continuing.

"Income/natural yield is likely to be the source of returns for the next few years."

Edward Park, investment director at Brooks Macdonald, said he has very little exposure to UK property right now, as he feels the structural shifts in the economy away from the high street, and the uncertain environment for the consumer make now a difficult time to invest in those assets.   

david.thorpe@ft.com

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