(Sharecast News) - Custodian Property Income maintained a fourth-quarter dividend of 1.375p, it confirmed on Wednesday, fully covered by its EPRA earnings per share of 1.5p.
The London-listed real estate investment trust also announced a special dividend of 0.3p for the 2024 financial year, increasing its total dividends for the year from 5.5p to 5.8p.
Looking ahead, Custodian Property said it was aiming for a 2025 target dividend of 6p, representing a 9% increase from 2024 and an 8.1% yield based on the prevailing share price of 74p.
Custodian Property reported robust leasing activity during the quarter, with a 15% reversion available, supporting rental growth and higher fully-covered dividends.
Like-for-like ERV increased 0.8% since 31 December, primarily driven by rental growth in the industrial sector.
The company's portfolio showed significant reversionary potential, the board said, with the portfolio ERV exceeding passing rent by 15%.
Notably, passing rent increased by 1.7% during the quarter, driven by strong occupier demand across all sectors.
Rent reviews settled during the quarter were on average 7% ahead of ERV and 29% above previous passing rent.
13 new leases and regears were also signed, securing £1.4m of annual rent and increasing property capital value by £2m.
Custodian Property's EPRA occupancy increased to 92%, rising to 94% when vacant ERV currently under offer was excluded.
Valuations across Custodian Property's portfolio of £589.1m remained flat on a like-for-like basis during the quarter.
Asset recycling efforts were successful, with properties sold for proceeds exceeding valuations.
Notably, since the quarter ended, additional properties were sold for significant premiums above their 31 December valuations.
The company said it was continuing its redevelopment and refurbishment activities, expecting yields on cost above average borrowing costs.
Capital expenditure of £0.9m during the quarter was projected to enhance asset valuations and environmental credentials, ultimately increasing rents and providing a yield on cost of at least 7%.
Custodian Property said it was maintaining prudent debt levels, with a net gearing of 29.2% loan-to-value as of 31 March, slightly lower than the prior period.
Property disposals had further reduced pro-forma net gearing, aligning with its medium-term target of 25%.
Additionally, the weighted average cost of aggregate borrowings decreased to 4.1%, contributing to overall financial stability.
"These dividend increases, which are expected to be fully covered by net rental income, reflect the improving earnings characteristics of the company's portfolio with recent asset management initiatives and the disposal of vacant properties increasing occupancy and crystallising rental growth," said chairman David MacLellan.
"Our investment manager continues to control costs tightly, while the company's substantially fixed-rate debt profile is keeping borrowing costs below the current market rate.
"The board's objective is, as previously stated, to continue to grow the dividend on a sustainable basis, at a rate which is fully covered by net rental income and does not inhibit the flexibility of the company's investment strategy."
At 1100 BST, shares in Custodian Property Income REIT were up 0.48% at 74.56p.
Reporting by Josh White for Sharecast.com.
Cust Prop Inc (CREI)