With this being the case, I think investors would do better to look to publicly-traded real estate investment trusts (REITs) instead of rental property if they want to invest in the sector. Today, I’m going to outline two REITs I think could be great alternatives. 

Office income

My first pick is office owner Regional REIT (LSE: RGL). As its name suggests, the company specialises in buying commercial property outside of London. Management is mainly focused on buying office buildings in areas where there’s a strong demand for such properties. Across its portfolio of 150 properties, it has 850 tenants, many of which are blue-chip businesses on 10-year-plus leases.

Regional’s tenant selection process is driven by its primary goal of generating income for shareholders from a diverse property portfolio. Since its launch in 2015, the dividend, which is paid quarterly, has risen from 7.7p to 8.3p. At the current share price, that gives a dividend yield of around 8%. On top of this, at the time of writing, the stock is trading around book value so you can buy the shares for the same price as the property portfolio is worth.

To help boost growth, the company recently completed a £62m fundraising, which was quickly snapped up by shareholders who were happy to support Regional’s growth plans.

So, all in all, you can get an 8% dividend yield from this diversified office owner without having to pay a premium to do so. I think you’d be hard-pressed to get the same kind of return from buy-to-let property in the current market.

Niche market

My second buy-to-let property alternative is healthcare REIT Assura (LSE: AGR). This business owns a portfolio of primary care medical facilities across the UK, giving it an income stream from an extremely defensive real estate portfolio in a growing market. 

People will always need to visit doctors, so there’ll always be a need for medical facilities. But the average investor can’t buy primary medical care facilities on their own and that’s why I think Assura is such an excellent investment. For around 75p, you can buy a share in this business and get a steady stream of income from medical facilities.

At the time of writing, the shares support a dividend yield of 3.8%. Over the past six years, the distribution has grown from 1.82p per share to 2.55p. And City analysts are forecasting a further 10% increase for the current financial year.

Assura’s dividend yield might be below the market average, but I think that’s a reflection of how secure this income stream is, and is a discount worth paying. That’s why I would consider this unique property business as an alternative to buy to let.

The post Buy-to-let could be dead. Here are two alternative property investments I’d consider appeared first on The Twelfth Magpie.

More reading

• How to target £100 in monthly passive income with £13,729 in cash

Rupert Hargreaves owns shares in Regional REIT. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

IWG, or Regus as it was formerly known, calls itself a “global operator of leading co-work and workspace brands.” Business is booming in this section of the office market as self-employment and flexible working becomes the norm for millions of workers around the world who want more from their jobs. Larger companies are also rushing to lease space because providers like IWG offer more flexible contracts, unlike traditional leases, which can tie tenants in for decades. 

IWG has invested hundreds of millions of pounds in its office estate in the past few years to attract more customers and it seems to be working.

Earnings growth

For the six months ended 30 June, revenue increased 17.3% in actual currency, and gross profit increased 7% year-on-year. Profit after tax, including discontinued operations, jumped 579% to £294m. Earnings per share from continuing operations came in at 4.2p for the first half of IWG’s 2019 financial year. 

Its income in the period received a boost from its £320m partnership transaction in Japan, which was just one of the “multiple” franchise agreements the group has signed over the past few months. Including cash generated from operations, this transaction boosted IWG’s cash inflow to £385m in the first half. 

Management is investing around two-thirds of this income back into its office portfolio, and the rest is being paid out to investors. The interim dividend is rising 10.3%, and the firm is spending £100m repurchasing shares. 

These results seem to put the company well on the way to meeting City growth forecasts for the year. Analysts have pencilled in earnings of 12.3p per share for 2019, and 14p for 2020, putting the stock on a forward P/E of 29.3. This is above what I would usually be willing to pay for a low-growth business like IWG.

However, the company’s international presence, cash generation and record of returning excess funds to investors lead me to the conclusion that this might be an attractive investment for your stocks and shares ISA today. The dividend has doubled over the past five years, and the current yield stands at 1.9%. 

Defensive income

Another income investment that I think might be worth your research time is healthcare facility provider Assura (LSE: AGR). I think this healthcare real estate investment trust is one of the most defensive investments you can buy today.

The business model is simple. The company buys specialist healthcare facilities and then leases them to healthcare providers, predominantly the NHS. This model generates a steady stream of income, which it then returns to shareholders. Over the past five years, Assura’s dividend yield has grown by around 50% as its property portfolio has nearly tripled in value.

Today, shares in the healthcare REIT support a dividend yield of 4.3%, and analysts believe the payout will increase by 4% by 2021, giving a yield of 4.5%. Book value per share (the total value of the company’s property assets minus borrowing) was 53.4p at the end of its last reported financial year. On this basis, the stock is currently trading above book value, but once again, I think it’s worth paying a premium to get your hands on shares in this one-of-a-kind business. 

The post £2,000 to invest? I’d buy these 2 dividend shares for my ISA appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

These are highly attractive economics, which just aren’t available to the average buy-to-let property investor. And that’s why I’m recommending PHP, as well as some of its close peers, as a replacement for traditional buy-to-let. 

Higher returns 

Returns from buy-to-let investing have been falling for years. Recent government regulation, coupled with changes to the tax regime, which directly affect landlords, has only accelerated the slide. These changes have severely dented the appeal of buy-to-let investing, in my opinion. 

Luckily, there are plenty of stocks out there with similar qualities to buy-to-let without all the hassle. PHP is a great example. The company manages a portfolio of healthcare facilities around the UK and Ireland. Similar to the deal outlined above, most of these properties are rented out to government agencies, with multi-decade agreements.

At the end of December 2018, PHP’s property portfolio was worth 105p per share, up around 5% year-on-year. The annualised contracted rent roll increased 9.8% during the year and occupancy hit 99.8%, which I think highlights the quality of the group’s property portfolio. The stock currently yields 4.8% and should rise steadily over the long term as rental income grows with inflation.

Development pipeline 

Assura Group (LSE: AGR) is another strong healthcare real estate investment trust (REIT). Last year, this company invested £175m in new healthcare facilities through the acquisition of 45 medical centres and completion of two developments. The weighted average unexpired lease length of this portfolio is 14.6 years. In total, the company now owns 553 medical centres across the UK with a total rent roll of £100m.

More investments and developments are planned. The group is currently considering around £170m of opportunities to add to its portfolio. At the same time, management is divesting properties that don’t meet its returns criteria. This active portfolio management gives me confidence that Assura can both grow its dividend and net asset value in the years ahead. The stock currently supports a yield of 4.8% and has a net asset value of 52.7p per share.

Government support 

Another part of the property market that interests me is in student property and it looks as if demand here won’t slow down anytime soon. But investing directly can be costly, and management levels are intensive. That’s why I like the look of Empiric Student Property (LSE: ESP), one of the largest public-traded  groups in the UK sector. The company does all the work of managing the properties for investors and all they have to do is pick up their regular dividend cheques. 

City analysts have Empiric paying out 5p per share for 2018, rising to 5.03p for 2019. At the current share price, these figures give a dividend yield of 5.1% for the next two years which, in my opinion, is a much more attractive rate of return than investing in buy-to-let, especially when you don’t have to lift a finger to manage these properties. At the end of June 2018, the company’s net asset value per share was 105.5p so, right now, the stock is trading at a discount to its asset value. 

The post Forget buy-to-let. Here are 3 property stocks I’d buy instead appeared first on The Twelfth Magpie.

More reading

• £10,000 in either of these FTSE 250 gems could net around £800 in passive income. But which to pick?
• 1 REIT could turn a £20,000 ISA into annual passive income of £1,580
• With yields of 8.4% and 7.9%, are these FTSE 250 shares perfect for a Stocks and Shares ISA?
• 8% dividend yield! This REIT could be a BIG winner after Keir Starmer’s resignation
• With an 8.5% dividend yield, is this cheap income stock a no-brainer?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Primary Health Properties. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Assura is a defensive real estate investment trust focused on healthcare — one of the world’s most defensive industries. The company collects rent from a portfolio of primary care medical centres across the UK on long leases.

Rising demand 

Demand for these properties from the NHS as well as other providers is high, especially new buildings that are more efficient and allow a higher number of patients to be treated more efficiently. Last year the government set out plans to invest £10bn to make NHS buildings fit for the future, £3bn of which could be made available to Assura in the ‘Primary Care Buildings Pledge’. 

Even if the government cash does not materialise, Assura is still well placed to grow as it invests in existing assets. In the third quarter, the firm acquired 22 medical centres and one development for a total cost of £84m and a weighted average unexpired lease length of 13.5 years. In total, the group now owns 498 medical centres with an annualised rent roll of £87m. 

A guaranteed income stream backs up the firm’s dividend yield, which currently works out at 4.3%, above the market average. Over the past few years, the payout has grown by around 10% per annum, and I expect this to continue as Assura invests in building out its defensive property portfolio.

Dividend growth champion 

As well as Assura, I also believe Bellway (LSE: BWY) could be a fantastic ISA buy. Its income stream is not that defensive, but when it comes to dividend growth the firm’s record is second to none. 

Over the past five years, as Bellway’s revenue has risen by more than 150%, net profit has jumped nearly five-fold enabling management to hike the per share dividend payout 510%. Even after this growth, the distribution is still covered three times by earnings per share and the builder has a debt-free, cash-rich balance sheet providing a cushion against any decline in revenues. 

As my Foolish colleague, Peter Stephens pointed out earlier this week, even though there are some risks to the prospects of housebuilders like Bellway, high demand from first-time buyers, who have been encouraged by government policies such as stamp duty relief and the Help to Buy scheme, indicates that market conditions will remain favourable for some time. 

City analysts are expecting earnings to expand by a further 19% over the next two years which should, they believe, allow the firm to hike its dividend by 20% while still maintaining the three times earnings cover. Based on these forecasts, the shares are set to support a dividend yield of 4.5% for 2019, marginally higher than that of Assura. As well as Bellway’s attractive dividend yield, the shares also trade at an attractive forward P/E of 7.3.

The post 2 FTSE 250 dividend stocks I’d buy for my ISA with £5,000 today appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Spirax spirals

Spirax-Sarco Engineering (LSE: SPX) is a multinational engineering group made up of two businesses, Spirax Sarco for steam specialities and Watson-Marlow for niche peristaltic pumps and associated fluid path technologies. Its job is to help customers save energy and water, boost efficiency, improve product quality and make improvements in plant health, safety and regulatory compliance.

The company’s share price has soared a dizzying 70% in the past 12 months and is up 180% over five years. Earlier this month it comforted investors by reporting that anticipated, organic sales growth in the first four months of the year beat last year’s. It expects sales and profits to rise 5% and 8% respectively year-on-year, at broadly constant currency rates.

Cash is king

Spirax-Sarco Engineering is growing through acquisition, buying steam specialities business Gestra for £160m earlier this month, and long-term target US electrical products provider Chromalox for £319m, in a cash and debt-free transaction last week. The purchase fits nicely alongside its existing operations and the company’s share price bounced more than 8% on Friday.

There is just one sticking point: the company currently trades at a pricey 33.25 times earnings. This is partly justified by its growth prospects, with earnings per share (EPS) forecast to rise a hefty 19% this calendar year, and another 8% in 2018. Even that will only reduce the valuation to 26.5 times earnings. Revenues and profits look set to rise strongly, although this cash generative business only yields 1.33%. It nonetheless looks a tempting buy, with a net cash balance of £60m prior to the Gestra acquisition, although possibly one to save for a market dip.

Get real

Assura Group (LSE: AGR) is the UK’s leading healthcare real estate investment trust, specialising in designing, building and managing a portfolio of nearly 400 GP surgery buildings and primary care centres. Recent share price growth has been so-so and the stock is up just 7% over the past year. But over five years it has grown 109%, and this success has lifted its valuation to more than 25 times earnings, which is somewhat heady.

Its recent full-year results appear to justify that kind of valuation, with continued growth across its portfolio, rents, profits and dividend. Assura posted a 21.2% increase in investment property to £1.3bn, 16.6% increase in rent roll to £74.4m and a 20% rise in EPS. Investors were duly rewarded with a 9.8% increase in its fully covered dividend, from 2.05p to 2.25p.

Primary investment

Assura also has a strong pipeline with £153m of acquisition and development opportunities, and management stating that the “overwhelming need” for improved primary care premises underpins the company’s future. Both the Conservatives and Labour have made commitments to improve NHS buildings in the next parliament.

The company’s EPS are forecast to grow steadily, by 7% in the year to 31 March 2018, and another 7% in the year afterwards. With a forecast yield of 4%, Assura offers an attractive income stream as well as positive growth prospects. There are good reasons why it isn’t dirt cheap.

The post Are these FTSE 250 flyers getting too expensive? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

But there’s another option available: real estate investment trusts. 

The REIT option 

Real estate investment trusts or REITs are different to normal stocks as they’re essentially property partnerships with 90% of the tax-exempt profit from the REITs’ property rental business having to be distributed to shareholders. This is known as a property income distribution, or PID. PIDs are taxable as property letting income and are taxed at 20% rather than the basic dividend rate. If held in an ISA no tax is paid, so investors receive a profit boost as no tax is paid at either the corporate or individual level. 

This beneficial tax treatment is just one of the many advantages REITs have over traditional property. Exposure to sectors that investors wouldn’t otherwise be able to access is another. 

Well diversified 

Assura (LSE: AGR) offers investors exposure to the highly defensive healthcare property market. With an investment property portfolio of £1.2bn and a loan-to-value ratio of 34%, the company is both well diversified and not dependent on debt. Also, there’s plenty of financial headroom for further growth through bolt-on acquisitions. 

At the end of September, the company reported a net asset value of 47.2p per share and hiked its first-half payout by 10% to 1.1p. City analysts expect the company to yield 4.4% this year. 

Primary Health Properties (LSE: PHP) is another REIT that invests in modern primary healthcare premises. Over the past five years, the firm’s revenue has more than doubled and management continues to invest in growth. 

The company already has 298 assets across the UK and recently acquired two more Scottish facilities for £7.2m. The firm’s net asset value per share is 90.4p and City analysts have pencilled-in a dividend yield of 4.9% for 2017. 

Buying at a discount 

Another benefit of using REITs to invest in property is the ability to buy REIT units at a deep discount to the value of the property owned by the firm. 

For example, at the time of writing British Land (LSE: LAND) is trading at 586p, down 20% over the past 12 months. However, over the same period, the value of the company’s underlying property portfolio has hardly budged. At the end of November, the company reported its net asset value per share was 891p, a full 52% above the current price. 

As one of the UK’s premier property companies, this discount to net asset value seems unwarranted. City analysts believe British Land will yield 5% this year. 

The bottom line 

All in all, investing in REITs is a much better alternative to investing in property directly. REITs offer more diversification, have tax advantages if held in an ISA, can be bought at a discount to net asset value and managements does all the hard work for you. 

The post Is this the best way to invest in UK property dividends? appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• £10,000 in either of these FTSE 250 gems could net around £800 in passive income. But which to pick?
• 1 REIT could turn a £20,000 ISA into annual passive income of £1,580
• With yields of 8.4% and 7.9%, are these FTSE 250 shares perfect for a Stocks and Shares ISA?
• 8% dividend yield! This REIT could be a BIG winner after Keir Starmer’s resignation

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.