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IntermediateBrazilian REITs · Lesson I4.3 · Module I4

Does the dividend fit the cash the fund generates?

Module I4: Analysis indicators

11 slides~5 minquiz at the end

In this lesson

  • Payout: paid ÷ generated
  • Reserves as months of runway
  • Income that expires
See the slides
Glass jar holding saved coins and banknotes

Brazilian REITs · Lesson I4.3

Same payout for 2 years. What about 9 months from now?

Steady income may be coming out of reserves, not this month's cash.

Where each real comes from

Income comes out of cash generated

  1. Cash inrent and interest received
  2. Cash outfees and fund expenses
  3. Cash resultwhat is really left
  4. Distributionwhat the manager decides to pay

This site judges the dividend by measured cash, never by what the manager chose to distribute.

Payout

How much of what it generates the fund pays

R$ 0.85paid per share÷R$ 0.70generated per share=121%payout
R$ 0.85−R$ 0.70=R$ 0.15short every month

Reading the payout

Below, near or above 100%

Below

< 100%

  • The surplus builds reserves

Near

≈ 100%

  • Pays what it generates

Above

> 100%

  • Pays from reserves or one-off cash

One month above 100% is no cause for alarm. The warning sign is staying above for a long time.

Runway

How many months do reserves last?

R$ 1.20reserve per share÷R$ 0.15shortfall a month=8 monthsof runway

Reserves are cash saved from months when the fund generated more than it paid.

When reserves run dry

In month 9, the bill comes due

  1. 0.851
  2. 0.852
  3. 0.853
  4. 0.854
  5. 0.855
  6. 0.856
  7. 0.857
  8. 0.858
  9. 0.709
  10. 0.7010
  11. 0.7011
  12. 0.7012
makes R$ 0.70

With no improvement in cash, income drops to what the fund generates: −17.6%.

Also check what's still to come

Money with an expiry date

  • Installment saleComes in for a while and ends with the last installment.
  • Rent guaranteeThe seller covers the rent until a set date.
  • Project under constructionIncome that doesn't exist yet.

These are promises that expire: today's income may depend on them.

Remember this

Three takeaways

  1. Payout = paid ÷ generatedAbove 100% for long, someone covers the gap.
  2. Reserves are runwayReserves ÷ monthly shortfall = months until a cut.
  3. Promises expireRent guarantees and installment sales have an end date.

Quick quiz · 1 of 2

It generates R$ 0.50, pays R$ 0.60 and has R$ 0.40 of reserves per share. How many months can it keep paying?

See answer

It is R$ 0.10 short each month. R$ 0.40 ÷ R$ 0.10 = 4 months. After that, with no improvement, income drops to R$ 0.50.

Quick quiz · 2 of 2

The fund generates R$ 1.00 and pays R$ 0.90 per share. What is the payout?

See answer

R$ 0.90 ÷ R$ 1.00 = 90%. The R$ 0.10 left over can build reserves for a weak month.

Lesson complete

Next lesson

I4.4Intermediate · Lesson I4.4Physical and financial vacancy are not the sameLosing the priciest space cuts income more than the area suggests.Continue
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Educational content, written for learners. Not investment advice.