1. I think investors are unhappy with the Sydney David Jones flagship store purchase -- which seems inconsistent with a conservative, defensive fund. The long WALE will be of little consolation if David Jones goes into receivership as the trend toward online shopping continues. I imagine there's a feeling that "if I wanted a REIT with retail shopping exposure to the likes of David Jones or Myer, I'd buy SCG or VCX. Stick with petrol stations and essential infrastructure".
2. Some investors are no doubt of the opinion that management is trying to increase their commissions by increasing funds/assets under management rather than grow profitability. Again, it is at odds with a conservative REIT. There seems to be some investor fatigue with recent acquisitions.
3. There has been two dilutive capital raisings in the past few months to pay for asset purchases. Not heavily dilutive, but it has increased the number of shares on offer which means each share is worth less. Also, gearing has increased. Investors are concerned about the prospect of more capital raisings in the future for more purchases.
4. REITS across the board had a nice jump when the COVID vaccine was announced but have been sliding over the past month. I don't hold CLW but I've noticed this in the three REITs which I do own. They are about 7% off where they are a month ago.
5. A distribution has just been paid. I often see that a REIT will jump in price more than the expected distribution before the ex-dividend day as investors buy for the distribution, then there's a fall in price by more than the distribution after the ex-dividend day. Investors lose interest in a bond-proxy stock which has just paid its distribution. Nobody wants to wait another X number of months for the next payment!
6. The share price is declining, which can create an aura of negativity. The share price looks like Woodside Petroleum's for most of 2020. Investors were selling due to bad news, sure, but also because everyone else is selling. People can lose sight of the medium-to-long term. In other words, CLW is out-of-favour and each day's decline is like a self-fulfilling prophecy.
7. I suspect some unit holders have been selling, as you mention, as they look for funds to purchase BHP or FMG for a similar dividend, but with the chance of growth which REITs lack. That is, nothing more than a rotation into other sectors, not a reflection on CLW.
8. COVID scares in NSW and Queensland haven't helped either.
That said, with a P/E ratio of 13, dividend yield of 6.5% and a price-to-book ratio which has just slipped under 1.0 (according to Commsec) I'm keen on CLW. It's been on my radar for months. I kicked myself for not buying at $4.60 (I was waiting for it to drop back to $4.50 -- stupid) and watched it climb to $5.20. It dropped to $4.33 earlier today and I'm now trying to decide whether to top-up one of my current REIT holdings, or take a position in CLW instead.
I think you can't go too far wrong at this price. With term deposit rates effectively below zero (when considering inflation and the tax you'll pay on your measly 1% interest) CLW could do no more than tread water -- be at $4.40 this time next year, and you'd be 5.5% better off from your distribution cheques.
All the best and don't let me talk you into buying or selling. Do some research and then decide what you want to do!
CLW Price at posting:
$4.39 Sentiment: Buy Disclosure: Not Held
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