The reopening of the economy, the engine of the recovery of the stock of dividends
What has led to the 15% recovery of the stock of value over the past three months is the reopening of the US economy. Apparently, despite a 9.5% year-over-year drop in GDP in the United States, retail sales actually rose 2.6%. This suggests that consumers still have a strong urge to spend.
Brookfield Property has invested 42% of its capital in its retail portfolio, which consists primarily of over 120 million square feet in 122 of the best shopping centers in the United States. As you probably know, closed malls have been hit the hardest in the retail industry during the economic lockdowns.
Physical commerce remains
Brookfield Property has revealed that retail sales in physical stores will continue to make up the bulk of total retail sales. From 2016 to 2019, physical retail sales in the United States increased from 83% of total retail sales to 79%. Above all, these sales have increased by 2% per year.
Data from the US Census Bureau showed retail sales in the United States fell during the economic shutdown, but rebounded quickly after physical stores reopened. It further suggests that physical stores still play an important role in retail sales.
Undervalued stock with incredible dividend and total returns
Brookfield Property’s stock is depressed due to its retail portfolio. At the time of writing, it is still trading at a whopping 30% discount from pre-pandemic levels.
Investors should note that BPY’s rental recovery remains above 90% for the remainder of its portfolio which consists of resilient office, logistics and multi-family assets.
The stock is under such pressure that it still yields 10.5% after a significant rally in the share price. When the pandemic does occur, there is a good chance that BPY will reach pre-pandemic levels with a 42% increase. In the meantime, shareholders can collect its rich dividend.
BPY dividend data by YCharts. BPY stock dividend and yield history.
The insane takeaway
Brookfield Property stock will rise or fall in the near term depending on the tightening or loosening of economic reopenings or temporary closings. Another economic shutdown can occur if there is a need. This is the short term risk that investors must take.
As a result, investors are better prepared to hold the stock for at least three years for things to normalize. Meanwhile, collect nice passive income from real estate stock.
If the stock sells due to another economic shutdown, investors should see this as a fabulous opportunity to accumulate stock, as the company has enough cash to stay afloat. In fact, it even has excess cash to buy back stocks at the current low levels.
Personally, I see myself owning shares of the stock for decades to come, as population growth will be a key driver that will enable BPY to create long-term shareholder value.
These stocks are also good buys in October 2020.
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Fool contributeur Kay Ng possède des actions de Brookfield Property Partners. The Motley Fool recommande Brookfield Property Partners LP.