SEGRO's (LSE:SGRO) long Dividend record is likely to end not with a cut but with a change of ownership, after shareholders backed an agreed Takeover by US logistics group Prologis. Until the deal is complete, investors remain entitled to a defined set of payments, which makes the income question unusually precise. Understanding those permitted dividends, and the way a property company's payout is measured, is the key to reading the position.

The record so far

As of 7 October 2026, SEGRO's annual dividend is 31.1p per share. The latest declared dividend is not available in the figures reviewed. The trailing 12-month Yield is 3.5% and the indicated yield 3.4%.

Dividend growth stands at 6.1% year on year. The company has paid for 41 consecutive years and has increased its dividend for 12 in a row. As a REIT, SEGRO is required to distribute most of its qualifying property income, which helps to explain the regularity of those payments. The 12-year run of increases depends on rental growth, and a REIT's dividend can rise only as fast as its rental income allows.

A real estate Investment trust receives favourable tax treatment on its rental profits in return for passing a large share of them to shareholders. That obligation creates a natural discipline, because the payout follows rental income rather than a discretionary choice about how much to retain.

Why 143.3% is not what it seems

The trailing Payout Ratio of 143.3% appears to show the company paying out far more than it earns, which in most sectors would be a warning sign. For property companies, however, reported Earnings include unrealised movements in the value of buildings, and these can push statutory profit sharply up or down without affecting rental cash flow.

The ratio is therefore a poor guide to the dividend's sustainability at a landlord such as SEGRO. Adjusted measures based on rental income are generally considered more relevant, although none are given in the figures reviewed. A figure above 100% should prompt a closer look rather than an immediate conclusion that the payment is in danger.

Property valuations move with interest rates and investor demand, so a year of falling valuations can depress statutory earnings even while tenants continue to pay rent on time. The reverse is also true, which is why the ratio can swing dramatically from one year to the next.

The takeover terms and permitted dividends

Prologis's best and final offer, announced on 4 August, gives SEGRO holders 0.0920 of a new Prologis share for each share they own, with a partial cash alternative capped at about 25% of total consideration. A Shareholder electing the basic entitlement would receive 258p in cash and 0.0690 of a new Prologis share. The offer was valued at 1,031.7p per share, or about £14.0bn, on the terms set out in the announcement, based on prices from 21 July. Because most of the consideration is in shares, its value will vary.

Shareholders are able to keep certain dividends without any reduction in that consideration. These comprise the 2026 interim of up to 10.14p, announced on 30 July, and a 2026 final of up to 22.56p if declared and paid before the deal takes effect. Together those would total 32.7p, which is above the annual figure of 31.1p recorded to 7 October 2026. Should the timetable slip, a 2027 interim of up to 10.55p and a 2027 final of up to 23.52p are also permitted.

Holders who end up with Prologis shares would then receive dividends from a US REIT, with different currency and tax considerations. For those who value the sterling income stream from SEGRO (LSE:SGRO), the election between cash and shares is therefore a decision about the form and currency of future income as well as about value.

Business still moving ahead

The operating update is a reminder that the company continues to trade normally and to sign new leases during the offer period. SEGRO's trading update on 21 October reported £70m of new headline rent contracted so far this year, 32% more than a year earlier, of which £28m came from development lettings. Occupancy rose by 20 basis points from the half-year to 94.7% and customer retention was 80%.

Rent contracted is the figure that eventually becomes the income distributed to shareholders, so a 32% increase is a useful indicator that the underlying Business has not paused while the takeover proceeds. Higher occupancy also reduces the amount of space generating no rent, and customer retention of 80% indicates that most tenants choose to stay. Development lettings are worth watching because new buildings add rent beyond what the existing portfolio produces.

Shareholders approved the scheme at meetings on 28 September, and the deal is expected to complete in the first half of 2027, subject to the remaining conditions and regulatory processes. SEGRO remains a separate listed company until then, and it continues to operate and to declare dividends within the limits set out in the offer.

What to watch

The main milestones are regulatory clearances, the general meeting needed by March 2027 to approve the final dividend, and the Scheme Hearing that follows it. Shareholders should also consider the election between shares and cash, and track movements in the Prologis share price, since these will determine the final value they receive.

Anyone holding LSE:SGRO for income should keep in mind that the permitted dividends define the payments that can be expected before completion, and that after it the income will come from a different company. Any change to the timetable would also alter which of the permitted payments are made, so the announcements ahead of the final dividend meeting deserve close attention. For shareholders deciding between shares and cash, it is also worth remembering that the value of the Prologis shares received will change daily until the deal completes.