On Friday, Barclays upgraded real estate company Covivio (COV:FP) stock from Underweight to Overweight, also increasing the price target to €61.00 from €56.00. The upgrade reflects the firm's positive view on Covivio's financial management and potential for earnings growth.
The analyst from Barclays highlighted Covivio's effective deleveraging over the past two years, which has not significantly impacted earnings. The firm's strategic moves, including the sale of lower-yielding German residential properties and further investments in European hotels, are expected to drive earnings growth through accretive asset rotation.
Additionally, Covivio has adjusted its dividend to a more sustainable level this year, with plans to return to a cash dividend from next year. This change is seen as an indication of the company's improved financial health.
Despite the anticipation of limited near-term earnings per share (EPS) growth, Barclays suggests that any earnings-accretive asset rotation could provide upside to their forecasts. The analyst also notes that Covivio's current EPS yield is 8%, which is higher than the sector average of 5.9%, positioning it favorably in the market.
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