GARDA Property Group (ASX:GDF): Yield with a Growth Angle
Jason McIntosh explains why GARDA Property Group [ASX:GDF] could be a dividend stock to buy now. In addition to having a high dividend yield, the stock is trading at a discount to NTA. This interview appeared on the Ausbiz financial news channel on 23 June, 2021.
Host: Jason, tell us about GARDA Property Group.
Jason: GARDA is a small to mid-tier property fund with a market cap of around $280 million. While a $280 million company sounds large, it’s not big enough to get into the All Ordinaries (the top 500). This means that stock is largely off the radar for many investors.
GARDA is a yield play with a growth angle.
The fund owns 14 properties in Queensland and Victoria. Most of the sites are in Brisbane (42%) and Melbourne (34%), with the rest in Cairns (14%), Mackay (7%) and the Gold Coast (3%).
An interesting aspect to the company is it’s “develop to own strategy”. This is where the company buys development sites, builds an industrial facility, and then leases the space.
The company has an active pipeline with three industrial projects underway. And it recently announced the purchase of three new industrial developments.
GARDA’s portfolio is 51% office and 49% industrial. But it continues to shift towards industrial.
A question mark around the company is its office portfolio. We don’t know what the office environment is going to look like in the future.
But I think that much of this uncertainty is already priced in.
Looking at the fundamentals, GARDA has a yield of 5.5% (share price of $1.295).
Another positive is that it’s currently trading at a discount to NTA of around 10.7%.
This is what the chart looks like:
I first sent a buy signal to members of my Motion Trader service at $1.11 last October. After an initial strong rally, the shares settled into a downward consolidation for several months. You’ll see this period on the chart.
A popular investment strategy is to “buy the dip”. This is where someone waits for prices to fall before buying. The risk with this approach is that a falling stock continues falling.
Rather than “buy the dip”, an alternative strategy is to wait for upward momentum. While this approach never gets in at the low, trading in the direction of the trend can help increase the odds of success.
With the share price breaking upwards in May, buying interest now appears to be returning.
Finally, with the RBA saying no rate hikes until 2024, a yield of over 5% is hard to ignore. And even if we just see an unwinding of the discount to NTA, the potential for gains exists.
I believe that GDF offers a good total return story over the next couple of years.
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I'm Jason McIntosh, the creator of Motion Trader. My career began in 1991 on the trading floor at Bankers Trust. Nowadays, I trade my own systems from home in Sydney.
Motion Trader is for investors who value robust analysis, data driven entry and exit signals, commentary, and education. I use engineered algorithms to identify when to buy and sell ASX stocks. No biases or guesswork, just data driven signals.