[PURCHASE] Arena REIT – [ASX:ARF]

By | January 24, 2017

REIT Purchase to increase overall portfolio

Well, I was able to invest in January and hopefully in the coming months I can invest once a month if all goes well with my finances. If you are interested in seeing my current portfolio, then check it here.

Arena A-REITΒ Β ARF 2,10 +0,02 +0,96%

I have been watching a few REIT’s lately and this is one that has caught my eye recently and I will list below the reasons why I like this share and why I added this to my portfolio. I wanted a reasonable yielding share to try and boost my portfolio for the meantime, what better to do that with than a REIT!

 

Why I Like ARENA REIT – [ASX:ARF]

Arena are a REIT based in Australia that own mainly buildings that are leased to Childcare Centres. They also own a few Healthcare based businesses but they are only 16% of their total valuation. Arena has had a good year in 2016 which lead to an increase in dividend yield and also share price. They are diversified in their building rentals and definitely do not have all their eggs in one basket, so to say. In 2016, Arena completed four childcare developments which they estimate a weighted average yield of 6.3% after they had been built.

In FY17-18, Arena expect to develop 14 extra projects which is expected to cost $52 million (AUD) and bring in a weighted average yield on cost of 8%. Not only that, but the board of directors expect to be paying down debt, while increasing dividends, this is why it is a long term hold to me.

Arena REIT ASX

Figure 1: Arena REIT – Growth since 2013 – Arena REIT AGM 2016 – www.arena.com.au

My Purchase Details

I have today bought 690 shares of Arena REIT at a price of $1.85 each plus trading commissions. I believe over the long run (30 years) this will increase perhaps two or three fold. Real estate sector will always fluctuate but I believe that in 30 years time we will be at an all time high, due to inflation and a stimulated economy.

ARF has payed a dividend (ex-div) date of 29th December 2016, so I just missed out on this one, that’s ok as the distribution amount is $0.02925 which equates to $0.117 per year or a total yield at my purchase price of 6.25%. While I do recognise this is probably too high for a real long term growth, the DRP plan they have in place is still enticing to me. It is possible to DRP this share and also get a discount of 1.5%! That means, that if this stock can keep its dividends coming at the same rate for a whole year of owning them, I will receive:

690 * 0.117 = $80.73 per year

(80.73/1.85)*(1.015) = 44 shares per year

Now that isn’t a bad income, and if all goes well, those extra 44 shares will bring me and extra $5 per year, not including compounding. Now there are a lot of if’s and buts in that estimation but I believe it should be a great purchase for the long run. Talk about making your money work for you!

This puts my total expected dividend income to roughly, $280 for 2017, how exciting! Onwards and upwards.

All the best.

12 thoughts on “[PURCHASE] Arena REIT – [ASX:ARF]

  1. Erik @ The Mastermind Within

    Nice analysis Buy, Hold Long.

    Given the growth potential and also given where you are in terms of your investing career, it probably is fine going for something a little more risky! 6% yield is fantastic.

    Looking forward to more insightful posts from you.

    Erik

    Reply
    1. Buy - Hold - Long Post author

      Thanks Eric, I appreciate it. I am always looking for long term growth, so I don’t mind a little bit of risk to my portfolio as I am only 25. Plenty of time for it to correct itself. Cheers

      Reply
  2. Mr. All Things Money

    Good work! It’s always exciting to see dividend income grow. As a matter of fact, I pay more attention to my ever increasing dividend income than the daily up and down of market value of my portfolio.

    Reply
    1. Buy - Hold - Long Post author

      That’s probably a good way to look at it. I don’t like to see the daily price as it can be discouraging sometimes. All the best.

      Reply
  3. Dividend Ten

    Congrats mate – I know nothing about Australian REITs but wish you all the best on this one! Keep building the snowball.. πŸ™‚

    Reply
    1. Buy - Hold - Long Post author

      Thanks Tristan. I believe they are a long term buy and hold as the yield should be quite nice and increase consistently over 20+ years.

      Reply
  4. Charlie

    Good move on the DRIP – the only ones I now consider are the ones with discounts (free money). Too bad on the ex-div miss though.

    Reply
  5. Mustard Seed Money

    Awesome purchase!!! It sounds like you really did your research and it seems to make a lot of sense. I’ll have to do some research for myself. Thanks for sharing!!!

    Reply

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