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Stock Commentary

Adjustment to my estimate of Citicore Energy REIT’s yield

Merkado Barkada
Adjustment to my estimate of Citicore Energy REITâs yield

Citicore Energy REIT [CREIT 2.26 1.74%] is unique in that it generates a regular, quarterly dividend from the lease revenue that it earns from its properties, and it also generates an annual special dividend from the variable profit-sharing clause in its lease contracts that gives CREIT shareholders a small percentage cut of certain energy selling profits.

CREIT provided estimates for both the regular quarterly lease dividends and the special annual profit-sharing dividend, but up until today, my REIT Tracker had only considered the regular quarterly lease dividends when trying to estimate CREIT’s forward-looking yield.

I’d originally excluded the special dividends categorically, as special dividends are usually reserved for situations that are unforeseen, or hard to predict, and I didn’t feel comfortable baking any kind of prediction into the yield estimation.

On reflection, I don’t think that’s what is going on here.

I contacted CREIT, and they confirmed that the variable revenues were still tracking according to the predictions in the prospectus. I still think it’s more speculative than I’m comfortable doing to include the special dividend into the calculation, but I think it’s also an inaccurate picture of what the CREIT model offers to ignore it.
 

MB BOTTOM-LINE

I am choosing a “trust but verify” approach to improve the accuracy of the MB REIT Tracker.

The whole purpose of the tracker is to give readers a better sense of the relative cost/benefit of one REIT compared to another, and considering that the forward-looking yield estimate is itself somewhat speculative (extrapolating the last dividend out into the future), it doesn’t feel like doing this with CREIT’s prospectus data is that far outside of what I’m already doing.

For now, I’m taking the FY22 variable income, chopping that into quarters, dividing that by outstanding shares, and adding that to the dividend before annualizing for the estimated yield.

While CREIT predicts the variable income to increase in 2023, I’m not applying 2023 estimated variable income to the quarters in 2023 that form part of the estimate just yet.

All of the additions are based on the lower 2022 estimate from the prospectus.

For transparency, I will always include a note in the REIT Tracker to keep everyone aware of how I’m calculating CREIT’s dividend, just so we’re all on the same page, and to allow you to make your own estimates and adjustments.

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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.

CITICORE ENERGY REIT

PHILIPPINE STOCK EXCHANGE

REIT

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