While some of this will be due to the general bounce in markets in 2019, I suspect investors continue to be enticed by the firm’s simple business model and fairly predictable earnings stream. 

Today, the mid-cap announced a 7% increase in revenue in the year to the end of March (to a little over £125m) as a result of a rise in occupancy and rates at its 99 units.

This was regarded as positive by executive chairman Nicholas Vetch, especially as “activity levels on the final quarter were impacted by consumer uncertainty” with regard to Brexit. Adjusted pre-tax profit came in 10% higher at £67.5m. 

Thanks to last year’s placing, Big Yellow has £65.3m to build new units. It acquired seven sites for development in London and the South East over the last year, bringing its pipeline to 12. 

This is expected to provide “a steady increase in capacity over the next few years” and “make a significant contribution to future revenue growth,” according to the company.  The firm continues to target an occupancy rate of 90% at its sites. 

Dividends are also growing nicely. This morning’s 6% increase to the final dividend (16.5p) brought the total payout for the year to 33.2p, giving Big Yellow a trailing yield of 3.1% at the current share price.

You can get more elsewhere but the growth in demand for rental accommodation (particularly in the capital), coupled with the tendency of many to hoard rather than throw away, leads me to believe these cash returns are likely to continue growing.

Big Yellow’s stock trades on 25 times forecast earnings for its new financial year. That’s undeniably expensive and I’d much prefer to begin building a position on any general market weakness.

Notwithstanding this, I’d be far more likely to buy the FTSE 250 constituent over something like Purplebricks (LSE: PURP).

Back-tracking

Like many of my Foolish colleagues, I’ve been bearish on the online estate agent for some time. Last July, for example, I remarked that the company’s desire to enter overseas was risky since the business model was still far from proven in the UK. Recent news from the company appears to have borne this out.

Earlier this month, it was announced that Purplebricks would be leaving the Australian market and that its presence in the US would be “materially scaled back” with a huge reduction in marketing spend. 

Put simply, things haven’t gone as well as expected. Cue the departure of founder and CEO Michael Bruce and a further dive in the share price.

While some might see a bargain at this level (97p), I’d caution those tempted to invest to question whether they’re anchored to the company’s former value. The promotion of former vice-president of sales, Phil Felice, to interim CEO in the States, does little to suggest it will ever reach these heights again. 

It may be a market leader, but the fact that people are expected to pay (albeit cheaper) fees to Purplebricks, regardless of whether their property sells, isn’t inviting in a subdued market. 

And without clarity on our EU departure, I can’t see things changing anytime soon.

The post Forget Purplebricks. I think this FTSE 250 income and growth stock is a far better bet appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the 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.

This could squeeze the cash flow of landlords at a time when rental growth may be limited by the UK’s economic uncertainty. And with house prices having the potential to fall depending on how the Brexit process moves ahead, being a landlord may become even less attractive.

With that in mind, here are two property-related shares which could be of interest. They appear to offer improving prospects and could generate higher returns than buy-to-let in the long run. As such, they could be worth buying in my opinion.

Growth potential

Releasing an update on Friday was UK healthcare real estate investor Impact Healthcare (LSE: IHR). The real estate investment trust (REIT) updated investors on pipeline acquisitions. It had previously announced that it was in advanced negotiations to acquire an identified pipeline of attractive investment opportunities which included a portfolio of UK care homes with over 2,500 beds.

However, it has now decided not to exchange contracts on the portfolio of assets during 2018. It will therefore not require an equity fundraising prior to the year end. It will, though, remain in discussions with the vendors of the portfolio and with other vendors of other attractive investment opportunities. It therefore expects to raise equity capital at some point in 2019.

The prospects for Impact Healthcare appear to be generally positive. An ageing population and increasing spending on the healthcare sector could lead to a tailwind for the industry in future. With the stock offering a relatively resilient outlook and a price-to-book (P/B) ratio of around 1, it could offer investment appeal for the long run in my opinion.

Total returns

The prospects for another REIT, Big Yellow Group (LSE: BYG), may also be relatively impressive. It has a dominant position in the self-storage sector, and this could provide it with a competitive advantage in terms of cost base and customer loyalty. It has relatively attractive locations, and its strategy suggests that further growth could be ahead over the long run.

The stock has experienced a period of volatility in recent months – in line with other FTSE 250 stocks which have a UK focus during the same time period. It now offers a dividend yield of around 3.9%, which is ahead of the FTSE 250’s yield of 3%. The company’s track record of dividend growth is impressive. It has been able to raise dividends per share at an annualised rate of 17% in the last four years. Although future dividend growth may not live up to its past increase, the performance of the business could remain sound.

Looking ahead, Big Yellow Group is expected to report a rise in earnings of 8% next year. Although the outlook for the UK economy may be uncertain, it could deliver impressive total returns in the long run.

The post Forget buy-to-let, I’d buy shares in these property companies instead appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any of the 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.

Aside from the inevitable faff involved in finding suitable tenants and ensuring the house or flat is appropriately maintained and insured, budding landlords must also contend with changes to regulation and tax, the threat of rising interest rates and the possibility of a slowing housing market (or, as some believe, a full-on crash in the event of a hard Brexit).

Taking all this into account and despite recent volatility in the stock market, here are just two deadly-dull, dividend-paying companies that I think are far better destinations for any spare cash. 

Dividend stream

Since the likelihood of the entire UK population becoming minimalists overnight is slim, I’m a big fan of companies specialing in self-storage. The business model of renting out space for people to dump stuff they can’t fit in their own homes (but still can’t let go of) is so wonderfully simple relative to the complications of being a buy-to-let investor. 

While this simplicity makes for a competitive market, FTSE 250 constituent Big Yellow (LSE: BYG) is the clear leader — a point supported by last week’s interim results for the six months to the end of September. 

Revenue grew 7% to £62.2m on that achieved over the same period in 2017 with adjusted pre-tax profit rising 9% to £33.3m. Like-for-like occupancy grew to almost 85% from 81.5% at the end of March with the company maintaining its target of 90% across its estate.  

But Big Yellow isn’t resting on its laurels. A recent placing means the company now has a little over £65m in its coffers to develop a pipeline of 11 sites which should, in turn, help earnings tick up for the foreseeable future. 

Yielding 3.6% in the current year, Big Yellow isn’t the biggest payer in the market but the recent 9% hike to the interim cash return suggests the company should remain a reliable source of dividends going forward. 

The one downside in all this is that, on almost 22 times earnings for the current year, its stock isn’t cheap. As such, a bit of pound-cost averaging may be the best approach. 

Steady performer

I’ve been positive on kettle safety control manufacturer Strix (LSE: KETL) ever since it listed on the market back in August last year.

Like Big Yellow, the small-cap is an example of a spectacularly boring business that translates into (what I think is) a fairly compelling investment. Another clear leader, Strix commands a 38% share of the global market in what it does. 

September’s interim results contained no big surprises, with the company trading in line with expectations. Revenue crept up 1.5% to a little under £43m with adjusted earnings rising 4.3% to £14.8m over the six months to the end of June. Positively, the firm’s debt pile also continues to fall with a reduction of over 17% to £37.9m achieved over the period.

Arguably a victim of the recent fragility across equity markets, shares in Strix now change hands for almost 25% less than they did in June. An opening share price of 135p this morning leaves the stock trading on just nine times earnings and offering a yield of 5.2%. Contrast the latter with the ongoing hassle of buy-to-let and I know where I’d rather put my money.

The post 2 dividend stocks I’d rather buy over bothersome buy-to-let appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the 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.

On top of this, landlords routinely face the headaches of property maintenance, void periods and late-paying tenants.

I prefer to get exposure to the property market by investing in dividend-paying property stocks. Today I want to look at two real estate investment trusts (REITs) which offer very different opportunities.

Own a slice of prime property

FTSE 100 REIT British Land (LSE: BLND) owns a big chunk of prime retail, office and residential space. Properties owned by the group include the Ealing Broadway and Sheffield Meadowhall shopping centres, plus office and residential developments such as London Broadgate and Paddington Central.

Of course, it’s no secret that conditions are tough for retail landlords. The value of British Land’s retail property fell by 4.5% during the first half, according to the firm. Rivals have reported similar figures.

Personally, I suspect that these property values will fall further. I don’t think we’ve reached the end of the rent cuts that are being forced on landlords by struggling retailers. However, I’m confident that in situations like this, it makes sense to buy the best property you can find, at a discount to book value.

British Land ticks these boxes. Occupancy has remained high, at 97.4%. Gearing is modest, at 28%. The group’s prime locations seem likely to continue attracting new tenants, even if rents drop. The shares also trade at an attractive 40% discount to their book value of 967p per share. This should provide us with a margin of safety against further declines in property prices.

The group’s 5.3% dividend yield looks fairly secure to me. I think British Land could be worth buying for long-term dividend investors.

A property growth stock

If you’d prefer to focus on a faster-growing part of the property market, you might want to consider self-storage market leader Big Yellow Group (LSE: BYG).

Big Yellow’s sales rose by 7% to £62.2m during the six months to 30 September, while like-for-like occupancy rose by 1.5% to 84.9% compared to one year ago.

Happily, this growth hasn’t come at the expense of profits. Adjusted pre-tax profit rose by 9% to £33.3m, while average net rent per square foot climbed 3.7% to £26.97. These figures suggest to me that pricing is staying ahead of inflation.

Should I stay or should I go?

One potential criticism of this business is that customers aren’t tied into long-term contracts. The average length of stay for all customers is only 8.5 months, so a slump in demand could leave Big Yellow with lots of expensive empty buildings.

With more people renting and sharing homes, I don’t think demand will fall. My only concern is that the market could become saturated, putting pressure on prices and reducing occupancy levels. Luckily, the company’s freehold property provides some insurance against this risk.

In my view, Big Yellow is one of the best stocks in this sector. My only reservation is that the shares are starting to look expensive, on a price/earnings ratio of 22 and at a 34% premium to book value.

For a business of this kind, I’d want a dividend yield of at least 4%. That suggests a share price of under 820p. At that level, I’d rate the shares as a buy.

The post Why I’d buy this FTSE 100 dividend stock before any buy-to-let property appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended British Land Co. 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.

The first of these firms is investment management platform Hargreaves Lansdown (LSE: HL). This well-known fund supermarket logged net inflows from customers of £7.6bn over the 12 months to 30 June, a 10% increase on the 2016/17 financial year.

DIY investors also saw the market value of their investments rise. The end result was that total assets under administration rose by 16% to £91.6bn last year, an increase of £12.4bn.

Revenue also rose by 16%, to £447.5m, while pre-tax profit climbed 10% to £292.4m. Shareholders will receive a special dividend of 7.8p in addition to the ordinary dividend of 32.2p. This gives a total payout for the year of 40p, a 38% increase on last year, when the firm didn’t pay a special dividend.

Too late to buy?

Hargreaves Lansdown’s share price has doubled over the last five years. The stock now trades on 42 times earnings with a dividend yield of just 1.9%.

Normally, I’d say this was too expensive to buy. But this business is a bit special. Today’s results show an operating margin of 65%. With net cash of £343.5m in the bank, most of this exceptionally high profit margin feeds through to free cash flow for shareholders.

The only question in my mind is whether the company can maintain such a high level of profitability. Although a big market crash could prompt customers to withdraw their cash, I don’t see anything else on the horizon that’s likely to seriously threaten profits.

As a value investor, this isn’t my kind of stock. But I wouldn’t blame anyone who continued to buy the shares after today’s news.

This could be safer than houses

The housing market appears to be slowing. But one part of the property market that’s still growing fast is self-storage. One of the biggest operators in this sector is FTSE 250 firm Big Yellow Group (LSE: BYG).

Shares in this group have doubled since August 2013 and its financial performance hasn’t been far behind. Adjusted pre-tax profit has risen by 110% to £61.4m over the last five years, while the shareholder dividend has climbed 88% to 30.8p per share.

One reason for this strong growth is that occupancy has steadily improved. In March 2014, Big Yellow said that just 69.8% of its space was occupied. By the end of June 2018, that figure had risen to 83.4%, despite the group expanding steadily over this five-year period.

A slam-dunk buy?

Big Yellow’s high profile buildings act as giant advertising billboards. They’re modern, secure and usually located in urban areas with good transport connections.

One risk is that the company’s long-term commitment to its buildings could leave it with a lot of empty units if demand slumps.

Customers can usually move out quickly if they want to. However, the firm’s statistics show that many don’t, with 30% of customers having rented units for more than two years.

Analysts expect adjusted earnings to rise by 9% this year and by 8% in 2019/20. The stock isn’t cheap on 1.5 times tangible book value. But the forecast dividend yield of 3.5% is competitive and the firm’s large market share is attractive.

I think Big Yellow could keep climbing.

The post Why FTSE 100 dividend growth stock Hargreaves Lansdown could be heading for 3,000p appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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.

With that in mind, here are two investment trusts which appear to offer strong income prospects. At the present time they yield over 4% apiece, with dividend growth having the potential to beat inflation.

Improving outlook

Reporting on Monday was real estate investment trust (REIT) Supermarket Income REIT (LSE: SUPR). The company invests in supermarket assets in the UK, with its trading update for the quarter to 31 March generally upbeat.

During the period it was able to conclude two rent reviews with 3.9% increases. Since acquisition, its investment properties have recorded a rise in valuation of 4.5%. Since its assets have weighted average unexpired lease terms of 18 years, with no break options, they appear to offer a relatively low-risk income opportunity. Rent reviews are upward only and are linked to RPI, while a net asset value of 96p per share suggests that the stock may be undervalued at its current share price of 101p.

With a dividend yield of 5.4% and forecast earnings growth of 14% in the next financial year, Supermarket Income REIT appears to offer a solid income investing outlook. While not the most exciting of companies, for investors who are seeking relatively solid income returns it could prove to be an enticing dividend option for the long term.

Solid performance

Also offering income appeal within the REIT sector is Big Yellow Group (LSE: BYG). The storage specialist has reported a relatively consistent financial performance in the last five years, with its bottom line rising in four of the five years. This suggests that it offers a lower-risk outlook than many of its index peers, with its 8% forecast earnings growth rate over the next two years having a high chance of being met.

With Big Yellow Group having a dividend yield of around 4%, it’s likely to continue offering income over the foreseeable future. Certainly, its price-to-earnings (P/E) ratio of 25 suggests that it may struggle to deliver an upward re-rating. However, if market volatility continues then it may be able to easily justify its P/E ratio since it could offer a resilient financial performance in future.

With Big Yellow Group seeming to have a solid strategy which has been able to deliver growth over a sustained period, its risk/reward ratio seems to be attractive. At a time when investor sentiment is difficult to gauge, it could be a worthwhile stock to buy and hold for the long run.

The post 2 investment trust dividend stocks yielding 4%+ that I’d buy with £2,000 today appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Big Yellow Group. 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.

However, there are a number of real estate investment trusts (REITs) which appear to be undervalued given their future prospects. In addition, many of them offer high and growing dividends. Here are two prime examples which could be worth buying today.

Improving performance

Reporting on Tuesday was West Midlands-focused commercial property specialist Mucklow (LSE: MKLW). The company’s first half of the year was relatively strong, with its underlying pre-tax profit increasing to £8m from £7.9m in the same period of the prior year. Its net asset value per share increased by 35p to 506p. With the company’s shares trading at 500p, it continues to trade below net asset value. This suggests that it could offer a wide margin of safety at the present time.

Encouragingly, the company’s performance has benefitted from steady occupier demand and rental levels that continue to grow. Property values are also buoyant, with strong investor interest and a lack of supply having a positive impact. The company’s vacancy rate at the end of 2017 was 7.5%, which is relatively high. However, this level is expected to decrease significantly in the second half of the year.

With a dividend yield of 4.6%, Mucklow appears to have income potential. Its earnings are due to rise by 2%-3% per annum during the next two years, which could allow its dividend growth to match inflation. With its shares appearing cheap at 500p, now could be the right time to buy it for the long run.

Investment potential

Also offering the prospect of high total returns within the REIT sector is Big Yellow Group (LSE: BYG). The self-storage specialist has enjoyed a prosperous number of years, with the supply of self-storage space in major urban areas across the UK continuing to be relatively limited. Therefore, pricing has generally been favourable, with this situation having the potential to continue over the medium term.

As a result, the company is forecast to post a rise in its bottom line of 8% in each of the next two years. This could filter down into a higher dividend. And with the stock currently yielding around 4% at the present time, it could become an even more appealing income stock for the long term.

Certainly, the outlook for the UK economy is uncertain. Brexit is now just over a year away and this could mean that consumer confidence comes under further pressure. This could translate into moderated demand for solutions such as self-storage. However, with a number of prime locations and an improving brand strength, Big Yellow Group seems to be well-placed to continue to perform well within what remains a growing industry.

The post Looking for dividends and growth? Consider these two top investment trusts appeared first on The Twelfth Magpie.

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• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
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Peter Stephens owns shares in Big Yellow Group. 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.

The right deal?

The merger of the two companies will take place via an all-share transaction. Shareholders in Intu will receive 0.475 New Hammerson shares for each share they currently own. This places a premium of 27.6% on the Intu share price as at close of business on 5 December 2017. This may appear to be a generous deal for the company’s investors – especially given the uncertainty in the UK retail sector at present.

However, it could also be argued that the deal undervalues the company. In fact, the £3.4bn purchase price for Intu is just 67% of its net asset value of £5.05bn. This suggests that there may be significant upside potential ahead for investors in the merged entity if the new strategy is able to gain traction and is welcomed by the stock market.

Clearly, a merger of this scale is set to have significant synergies. Already £2bn of asset disposals are being highlighted by the companies. In addition, cost savings seem likely, while a focus on higher-growth regions such as Ireland and Spain could bring increasing earnings and dividend growth in future. It may also bring additional sources of capital which allow the combined entity to expand its Premium Outlets Platform.

Therefore, the merger seems to be a logical step for the two companies to take, with it having the potential to drive improved operational, financial and share price performance in the long run.

More consolidation?

The REIT sector seems to be somewhat undervalued at the present time. When combined with an uncertain outlook driven by Brexit, this could lead to further consolidation across the sector. Two companies which appear to offer good value for money at present are Big Yellow (LSE: BYG) and Londonmetric (LSE: LMP).

Big Yellow has a price-to-book (P/B) ratio of just 1.5, which appears to be relatively low given its profit growth potential. The company has a dominant position in the UK storage sector and this could help to protect it to some degree from the potential headwinds within the economy.

The company is forecast to grow its bottom line by 8% next year, which suggests that it offers a degree of defensive characteristics. As well as this, a dividend yield of 3.6% which is due to rise to 3.9% next year, indicates that it offers strong income potential. With a sound strategy that has delivered earnings which have risen 3.3 times over the last four years, Big Yellow could be a potential bid target in future.

Low valuation

Similarly, Londonmetric appears to be cheap at the present time. It trades on a P/B ratio of 1.2, which is relatively low given its forecast growth rate of 5% per annum during the next two financial years. The company also has a strong income outlook. It has a dividend yield of 4.5% forecast for the next financial year, which could help its investors to overcome the threat of inflation. And with a strategy that has delivered four years of consecutive earnings growth, it appears to offer stability at a time when the outlook for the wider economy is uncertain.

Clearly, it’s difficult to select which companies could become bid targets. However, Big Yellow Group and Londonmetric both offer impressive investment outlooks and, with such low valuations, they could be attractive to a number of sector peers.

The post Intu Properties plc & Hammerson plc agree £21bn merger: are these 2 investment trusts next? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Big Yellow. 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.