Stockland Corporation Ltd (ASX: SGP) shares currently offer a dividend yield of 6.93%. Could it be time to buy for the dividend income?
About Stockland
Founded in 1952, Stockland is one of Australia’s largest diversified property development companies with projects in shopping centres, housing estates, industrial estates and retirement villages.
According to Stockland, 124 families move into a home in one of its residential communities every week.
The Positives
Stockland’s diversification is an attractive trait and sets it apart from some other property developers who focus on one area of the real estate market. Similar to Charter Hall Group (ASX: CHC), Stockland has operations across multiple sectors but, as of December 2018, was allocating around half of its capital to retail town centres.
In a recent market update, Stockland highlighted re-election of the Coalition government, the Federal First Home Loan Deposit Scheme, proposed APRA guideline changes and the RBA’s rate cut as positives for the property market and for Stockland shares.
Another positive in my view is that Stockland has been divesting non-core assets, selling $284.5 million of assets over the last 12 months. This leaves Stockland with further capital to focus on the core performers in the portfolio.
One more factor to like is, of course, the dividend yield which currently sits at 6.93%
The Risks
Stockland pays unfranked dividends, which could be a negative point depending on your personal tax situation. If you’re not familiar with franking credits, you can read more about them here.
Considering Stockland’s macro risks, there are a few key points. Stockland’s recent market update mentions all the tailwinds that are supposed to push residential property prices higher, however, their update also shows that they plan to reduce capital allocation to communities and increase allocation to logistics developments.
While this might be a smart move, to me it signals that Stockland might still be lacking confidence in residential property.
Retail town centres are also likely to suffer over the medium-to-long-term due to increased online competition. While this trend may play out slowly, it’s certainly worth considering if you’re looking at a long-term dividend investment.
Summary
There’s a lot to like about Stockland, including the dividend yield, their scale, and diversification. Looking at the bigger picture though, there are some big risks that stand out to me.
Personally, I’d rather invest in one of the dividend-paying companies mentioned in the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
