Is the Vonovia share more than just the dividend?

It’s an intriguing question about whether Vonovia-Shares (WKN: A1ML7J) are more than just dividends. In any case, if we compare the last reported annual dividend of EUR 1.66 with a current share price of EUR 28.46, we get a dividend of 5.83%. That means there really is a lot of potential on this metric.

But let’s think the question further. Ultimately, the investment dissertation should be more than just the dividend. So let’s take a look at what else the Vonovia stock has to offer.

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Vonovia Share: More than just the dividend?

In any case, there is something more than just the dividend. If we now look at the Vonovia share, we see that with funds from operations per. share of EUR 2.15 there is a payout percentage of around 77.2%. That means we still see potential here. This potential, in turn, could be used elsewhere.

But there are other ways to answer the question. Funds from operations per. share rose to EUR 0.73 in the first quarter following the acquisition of Deutsche Wohnen. This means that there may be a lower payout ratio. Possibly less than 60% in the financial year 2022. In other words, even with a dividend of 5.8%, just over half would then be used for the dividend.

However, the Vonovia share also has a bit more to offer in other respects. For example, a more defensive, timeless business model. Residential real estate in strong metropolitan areas is a timeless approach that actually always works. Some growth, for example through new leases, could also allow for operational growth, growth in dividends and a cheaper valuation in the medium to long term.

In this regard, we can see: Yes, the Vonovia share is more than just the dividend. But next to the possibility, there are still the known risks. Let us also look at the details.

Opportunity to take acceptable risks

The Vonovia share is now relatively heavily indebted, even for a high dividend. Although it is not necessarily unusual for a residential real estate group. Finally, there is some credit leverage left in this industry. But it is also a lack of price power that is pulling investors away from the residential real estate group.

But the question is how does this assessment fit with the risks. The Vonovia share not only has a dividend of 5.8%, but also a price-to-FFO ratio of less than 10. In my opinion, these risks are therefore adequately priced. But decide for yourself how you see it.

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Vincent owns shares in Vonovia. The Motley Fool does not own any of the listed shares.

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