BMO Commercial Property reinstates monthly dividends, but at lower rate

The ii Super 60 trust announces that monthly dividends will return, but at 50% of the previous rate.

The board of BMO Commercial Property Trust (LSE: BCPT) have announced that monthly dividends will be reintroduced, but at 50% lower than the previous rate. 

In a trading update this morning, the investment trust, which appears on the interactive investor Super 60 list of investments, said that from this month onwards it will pay 0.25 pence per share. It added that the level of monthly dividend will remain at this rate until further notice, but that it will be kept under review in light of the significant economic risks and continuing uncertainty regarding the path of Covid-19. 

On 16 April, the board temporarily suspended the monthly dividend. At the time, the board said as in a statement: “Notwithstanding the group’s strong balance sheet and its high-quality and diversified portfolio, in view of the current uncertainty [of] the impact Covid-19 will have on future rental receipts, particularly in relation to the group’s retail and leisure tenants, the board considers it prudent to temporarily suspend its future monthly dividend payments in order to strengthen cash reserves and protect the long-term value of the group.

“The board currently intends to re-introduce distributions when conditions improve and believes that the portfolio is well positioned to begin its recovery once the temporary restrictions surrounding Covid-19 are lifted.”

In today’s update (4 August), the board said the company “has made good progress over the last three months with rent collection at a higher level than was originally feared. Progress has also been made in reaching agreement to restructure leases and the short-term deferral of rent for stressed tenants.”

As a result, monthly dividends have been introduced, but at 50% of the previous rate.

“The board has also been focussed on preserving the company’s financial strength with the ambition of reintroducing a sustainable dividend at the earliest appropriate time.”

An update on performance was also provided, with BMO Commercial Property Trust (LSE: BCPT) reporting a net asset value return of -2.9% for the quarter ending 30 June 2020. Its share price total return for the same period was -15.4%.

The trust’s return to paying a monthly dividend means that there are now two investment trusts that pay a monthly income to investors, alongside TwentyFour Select Monthly Income (LSE: SMIF). 

Prior to the coronavirus pandemic, six investment trusts paid a monthly dividend. 

Under formal review

The BMO Commercial Property Investment Trust is included in the ii Super 60 list of rated funds as an Income option within the Property category.

In line with our stated methodology, the investment selection committee decided to put the trust under formal review on 23 July 2020 due to continued uncertainty around income payments and its persistently wide share price discount to net asset value. The investment trust suspended its monthly dividend payment in April and until the trading update on 4 August there had not been any official announcement as to when dividends will be resumed.

As part of the formal review process, we will conduct an in-depth appraisal of the investment process, the shape and quality of the portfolio, prospects for resumption of dividend payments, and will consider the various factors that contributed to the significant discount that the trust is trading at.