While I’m still decades away from retirement, I’ve begun planning ahead and loading up my Self-Employed Personal Pension (SIPP) with top-notch UK dividend stocks. But rather than focusing on the shares offering the highest yields today, I’m hunting the companies capable of hiking dividends for years and decades to come.
Opportunities in commercial real estate
In a higher interest rate environment, real estate investment trusts like LondonMetric Property (LSE:LMP) and Safestore (LSE:SAFE) haven’t received a lot of love from investors. In fact, over the last five years, both landlords have seen their valuations slide by around 10%. And yet in both cases, dividends have continued to climb.
The growth drivers for these businesses are a little different. LondonMetric receives a good chunk of demand from the e-commerce sector with many tenants renting out warehousing space. On the other hand, Safestore is predominantly driven by consumer demand, which has waned in recent years, particularly due to a slowdown in home renovation projects.
However, even in a weakened environment, both businesses remain highly cash generative, enabling impressive resilience to external pressure. LondonMetric, in particular, has proven that even during a market downturn, it can continue to grow earnings at a double-digit pace and use that strength to snap up smaller, struggling rivals.
As for Safestore, while earnings growth has been tougher to achieve, it’s still expanding its territory in Europe, positioning itself for when market conditions eventually recover. And given that the European self-storage industry is still in its infancy, an enormous long-term growth opportunity exists to grow its cash flows and, in turn, dividends.
That’s why, despite the risks, both dividend stocks are already in my income portfolio.
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International exposure
Another cash-generative enterprise that’s been lacking some love lately is Somero Enterprise (LSE:SOM). The firm’s the global leader in laser-guided concrete levelling, contouring, and placing machines. While it’s hardly the most exciting business out there, it’s proven to be an essential player in the non-residential construction sector, especially in North America.
Beyond the benefits of geographic diversification, Somero’s seeking to capitalise on the enormous infrastructure spending plans by the US government over the coming years. And with an impressive line-up of new screed machines being launched throughout 2025, Somero’s maintaining its top-dog status.
Sadly, the global construction market isn’t in an ideal spot. With higher interest rates, large-scale projects have been put on hold, lowering demand for the firm’s machines. And consequently, revenue growth in countries like Australia has been hit hard.
That’s obviously frustrating. But this isn’t the first time management has had to navigate through cyclical downturns. And with $29m of cash on its balance sheet with virtually no debt, its financial health remains in tip-top shape, as is the dividend. And with a yield of 6.9% on offer today, it’s a dividend stock that investors may want to consider investigating further, despite the challenges.
