Whilst I firmly believe that DDR is a good company, there's always been two major risks that people seem to not want to address. That is their debt levels and the fact that the company pays out 100% of profits to shareholders and secondly, key person risk.
For the first quarter, DDR reported Revenue of 772.3m. Sounds great. Reported revenue for FY 2022 was $3.10b. Times 772.3m x 4 quarters = $3.09b.
Have we seen the last of interest rate rises which DDR admitted impacted their FY22 results? What about wage rises? DDR's Net profit margin for FY22 was a wafer thin 2.4%. But then again, that's been the norm for this business.
Priced at about 20x, I'm of the opinion that DDR is currently fairly priced and I'll be looking to add to my holdings. I think that they're in a good space for the future. I can't imagine the demand for tech related products and distribution of those products reducing over the next ten years. But I do see risk in this business and I also see another opportunity coming up to purchase shares at cheaper prices. I don't see $10 in the shorter term.
But the key person risk factor should be taken into consideration by all holders. And exactly how confident are you that you'll be getting a 100% payout ratio going forward? Just take the most recent dividend cut as a red flag. Ignore red flags at your own peril. There's been several lately.
DDR Price at posting:
$8.42 Sentiment: Hold Disclosure: Held
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