Real Estate Investor Magazine South Africa November 2014 | Page 53

LISTED

BY MIKE BROWN

How Listed Property Shares

Perform

Compared to other equity investments

H

ow does the listed property sector compare to
other equities listed on the JSE?

General equities
The equity investor is able to choose from over 400
equity companies listed on the JSE, ranging from
mining, through to industrial, retail, financial and
service companies. One thing all these companies have
in common is that they look to grow their revenue and
profit base sufficiently to generate a growth in earnings
that will encourage investors to hold shares in their
companies.
The valuations placed on current and future earnings
typically rely on a calculation of internal rates of return
on cash flows, or on some valuation of earnings (price
ratios of earnings, or yields of earnings), to determine
a price at which these equities will subsequently trade
on the stockmarket.
General equities also pay dividends, normally twice a
year, typically around 3% per annum. Most companies
have a dividend cover of three to five times, so retain
a significant portion of their earnings for reinvested in
the company, rather than payment to shareholders in
the form of dividends.
Most equity companies, therefore, rely on the
growth in earnings, rather than dividend payments, to
determine the value at which their shares trade on the
JSE and the total return is only partially determined by )ѡ