The rental war between landlords and retailers has gathered pace as Premier Investments Limited (ASX: PMV) became the latest retailer to reopen stores. But the retailer, which is Australia’s biggest retail tenant, says it will pay rent based on a proportion of gross sales.

ASX retail shares seek rent relief 

Premier Investments is among a plethora of Australian retail shares that have sought rent relief during the coronavirus pandemic. Accent Group Ltd (ASX: AX1) is also seeking for rent to be calculated by reference to a percentage of sales. 

Premier Investments has said it’s prepared to walk away from stores if landlords don’t play ball. Around 70% of Premier’s leases are due to expire in 2020 or are already in holdover. The company has refused to pay rent since it shut its stores in March, although it announced the reopening of stores from Friday. 

Premier Investments experienced a 74% fall in sales in the 6 weeks to 6 May. Retail store sales were down 99%, however, online sales have increased by 99%. Accent Group has also seen a surge in online sales which quadrupled in the period during which stores were closed. 

Accent Group has concluded successful rental negotiations with landlords of more than 100 stores, but says if it is unable to achieve an outcome it considers fair it will close stores. This has already occurred with one major landlord, with Accent Group giving notice to exit 28 stores at lease expiry over the next 6 months. 

ASX REITs also suffering 

Landlords are not escaping unscathed. This week, Scentre Group (ASX: SCG) said it would not be paying its interim dividend due to uncertainty around the pandemic and the timing of operating cash flows. Customer visitation to the Scentre shopping centres fell to a low of 39% of the previous year’s levels in April and May. 

At Scentre’s properties, 57% of retailers representing 70% of gross lettable area are open, with more retailers to reopen over coming weeks. The shopping centre operator is targeting at least a 25% decrease in centre operating expenses during the pandemic period. 

Vicinity Centres (ASX: VCX) reported that as of 4 May, 50% of stores in its shopping centres were open, representing 65% of gross lettable area. Vicinity withdrew earnings and distribution guidance in March given the uncertainty around the impact of COVID-19 on operations. 

Vicinity is negotiating with retailers whose businesses have experienced a downturn and accelerating temporary arrangements to assist them through the situation. CEO Grant Kelley said, “inevitably, our income at this time is being impacted negatively, however we agree with the Federal Government’s sentiment that landlords and tenants have a shared responsibility to tackle the challenges brought about by these unprecedented times.”

More reading

• ASX 200 drops over 1% at the market close
• Why CSR, Kogan, Premier Investments, & ResMed shares are storming higher
• Premier Investments share price higher after announcing store reopenings and online sales surge
• This ASX REIT just cancelled its interim dividend
• Are ASX retail shares undervalued today?

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia has recommended Accent Group and Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The pool of reliable high-yield dividend paying stocks is shrinking!

It’s income investors who depend on regular distributions from their ASX share portfolio who are the biggest losers from the coronavirus pandemic.

You can still find stocks generous defensive dividends if you cared to look, and I think these stocks will outperform the S&P/ASX 200 Index (Index:^AXJO) due to their scarcity.

Growth beating income

It’s easier to find stocks with good growth potential despite COVID-19 than dependable dividend paymasters, in my view.

Look at the tech sector in the US and Australia. The likes of Amazon.com, Inc. (NASDAQ: AMZN) and Afterpay Ltd (ASX: APT) surged to record highs recently.

Meanwhile, the list of ASX stocks suspending or lowering their dividends is growing. We don’t have to mention the big banks like Westpac Banking Corp (ASX: WBC) or Australia and New Zealand Banking GrpLtd (ASX: ANZ). The big hit they took to profits forced them to postpone paying an interim dividend.

Even stocks like CSR Limited (ASX: CSR) which delivered a much better than expected profit result is erring on the side of caution and suspending its payout.

I am not suggesting that turning into a scrooge as we face off what is probably the worst recession in living memory is a bad idea. But some stocks are going from strength to strength, and are offering up an enticing dividend that’s hard to ignore.

Rock solid dividend

One such candidate is iron ore miner BHP Group Ltd (ASX: BHP). I’ve long been overweight on the stock for this reason, and UBS just upgraded the stock to “buy”.

“In our view, BHP is in a strong position with gearing at 17% and net debt of US$12bn,” said the broker.

“This should enable BHP to continue to return surplus cash to shareholders at a time when other more traditional dividend-paying stocks are not.”

BHP is forecast to deliver at least a 5% yield before franking credits.

Perfect package

Another stock that is proving its dividend mantle is AMCOR PLC/IDR UNRESTR (ASX: AMC). The global packaging giant released its quarterly results yesterday, which I believed was a cracker.

JP Morgan shares this view and describes the stock as its top pick in the sector. The highlight was the cost control for Amcor’s Flexibles business (soft plastic packaging).

“We believe that AMC has ample opportunity to grow ahead of peers in the years ahead due to Bemis synergies, efforts on sustainability, further M&A or buy-backs,” said the broker.

“The primary concern we hear from investors relates to top line performance, but if 3Q20 trends can be sustained over the medium term (as management has suggested), we would expect to see a multiple re-rating.”

The stock is yielding around 5% and there’s scope for dividend increases, in my view.

More reading

• Why CBA, CSR, Fortescue, & Northern Star shares are pushing higher
• 2 quality ASX shares to buy for long-term growth
• 3 top ASX 200 shares you can buy on sale today
• Why diversification is important and how to diversify your portfolio with ASX shares
• 3 ASX 200 value plays for an economy hell-bent on recovery

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors.

Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, BHP Billiton Limited, and Westpac Banking. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia owns shares of and has recommended Amcor Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Amazon. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Looking for ASX shares with strong long-term growth potential?

I believe that the following 2 ASX shares are worth considering, and falls in their share prices over the past few months add to their appeal.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Some of our leading companies on the S&P/ASX 200 Index (ASX: XJO) that are normally viewed as strong and consistent dividend payers have either suspended or reduced their next dividend payments this year. This includes the likes of Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ), and National Australia Bank Ltd. (ASX: NAB). However, there are so far no indications that ‘Soul Patts’ will follow down this path.

Soul Patts currently offers an attractive fully franked grossed-up dividend yield of around 4.7% and has increased its dividend every year since 2000. The group keeps a meaningful amount of cash on its balance sheet and this cash can be used as a buffer in difficult operating times. Soul Patts funds its dividends from its net regular cashflow and its next dividend is expected to be similar to the prior year for FY 2020.

This strong balance sheet also places it in an ideal position to capitalise on any worthwhile investment opportunities if they suddenly arise, which is one of the reasons why I think Soul Patts has strong long-term growth potential. These growth prospects are also supported by its excellent management team and strong diversification across a broad range of industries.

Blackmores Limited (ASX: BKL)

There is no doubt that Blackmores’ recent financial performance has been somewhat disappointing.

In its most recent half-year results back in February, Blackmores revealed a 20% revenue decline in its Australia and New Zealand segment and the company’s China segment saw revenue drop by 6%. However, on a more positive note, the company does now appear to be getting its business back on track again after its entry strategy into China, in particular, has struggled in recent times.

Blackmores has put in place plans to strengthen its Australian business as it realigns its overall business strategy, which includes plans to further extend its investments into China. The company also plans an increased focus on the Indonesian market and aims to enter the Indian market within the next 12 months.

Blackmores’ management has also reported the coronavirus pandemic has resulted in a spike in demand for vitamin C and other immunity products both in Australia and internationally.

I believe that the coronavirus pandemic could potentially even change the mindset of some consumers to the benefit of supplements, leading to higher demand in the years ahead.

More reading

• Safe dividend stocks to buy today for the COVID-19 world
• 3 top ASX 200 shares you can buy on sale today
• 3 ASX 200 value plays for an economy hell-bent on recovery
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 drops over 1% at the market close

Motley Fool contributor Phil Harpur owns shares of Australia & New Zealand Banking Group Limited, Blackmores Limited, and Westpac Banking. The Motley Fool Australia owns shares of and has recommended Blackmores Limited and Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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