Kiwi Property Group will pay dividends this financial year after a brief suspension as the number of people visiting its shopping centres has returned to normal levels.

Since New Zealand moved to alert level 2 on May 14, the average pedestrian count in Kiwi Property's shopping centres, such as Sylvia Park in Auckland and The Plaza in Palmerston North, is up 1 per cent on the same period last year.

Kiwi Property said last month that retail traffic had already been surprisingly strong, down only 8 per cent during alert level 2. While it had already decided against paying a final dividend for the March 2020 year, it was more circumspect about future payments, saying it wanted more clarity on the impact of the pandemic.

Property stocks are typically bought for their reliable dividend income and their tangible assets are often considered recession-proof.

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This downturn threatened to be the exception to the rule as tenants, who were legally unable to access their premises, enacted force majeure clauses and stopped paying rent.

Half of the retailers in some of the country's largest shopping malls paid no rent in April, according to the New Zealand Council of Retail Property which represents Kiwi Property among other retail property owners.

Preserving cash

Faced with this loss of income and sudden insecurity to the value of its portfolio, Kiwi Property cancelled $55.3 million of dividends to help insulate itself from the crisis.

At the time, chair Mark Ford said the inherent uncertainty caused by the pandemic made not proceeding with the final dividend a "prudent decision."

Kiwi Property will resume dividends in the current financial year, and will pay at least 90 per cent of underlying cash flow for the six months ending September 30.

"In light of New Zealand's return to alert level 1 and the increased clarity around the country's trading environment, the company intends to pay an interim dividend for the year ending 31 March 2021," the company said in a statement.

Financially, the company was in a strong position with no bank debt maturing until 2023, $291m of untapped credit facilities and gearing of just 32 per cent as of March 31.

Kiwi Property is still negotiating rent relief with its tenants but expects abatements to cost the company $20m or $14m after tax.

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Data from Paymark show that total consumer spending through its eftpos customers in the week ended June 14 was up 1 per cent compared to last year.

Better-than-expected consumer confidence may reflect NZ's success in eliminating Covid-19 and ending lockdown sooner than anticipated, Westpac chief economist Dominick Stephens said.

Still, a severe recession is on the horizon and retailers remain wary that the pent-up consumer demand will evaporate as it takes hold; consumer confidence and consequent spending could fall again next quarter.

Cautious retailers

The Warehouse recently said it did not expect increased trading levels to continue and plans to lay off almost a thousand staff, while women's fashion brand Max plans to close 17 stores after the lockdown drained the company of operating cash.

Kiwi Property is sounding a confident note in the midst of difficult conditions, but does acknowledge the unpredictability of the new-normal.

It reminded investors that the dividend will be paid in December provided there are no other "unforeseen circumstances" such as "further Covid-19 related lockdowns or significant decreases in asset values or income."

Shares of Kiwi Property are down more than 30 per cent year-to-date and declined 0.9 per cent to $1.07 in early trading this morning.

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