One company offering an improving dividend outlook is FTSE 100 pharma stock AstraZeneca (LSE: AZN). Set to experience rising profitability over the medium term, this could boost its dividend prospects.

Also offering an impressive income outlook is a smaller company which reported positive news on Tuesday.

Impressive outlook

That company in question is real estate investment trust (REIT) Capital & Regional (LSE: CAL). The shopping centre specialist released news that it’s received formal consent for its extension and development plans at The Mall Walthamstow. It will transform the Walthamstow town centre, according to the company’s update, with an 86,000 sq ft extension planned for the existing shopping centre as well as up to 500 new residential homes.

Looking ahead, the plans could help to boost Capital & Regional’s bottom line growth rate over the medium term. The company is expected to report a rise in earnings of 7% in the current year, followed by additional growth of 6% next year. This suggests its strategy is performing well, with the slowdown in the UK economy not seeming to have affected its financial performance.

With a dividend yield of around 8.5%, the stock has significant income appeal. Its price-to-earnings (P/E) ratio of around 12 indicates it offers a margin of safety, which suggests that significant total returns could be on offer over the long run.

Changing business

AstraZeneca’s income potential also appears to be positive. Certainly, a glance at its track record of dividend growth indicates that it lacks appeal. However, the company has faced major challenges in recent years from the loss of patents that has resulted in rising generic competition and a lack of income growth. This has forced it to freeze dividends for a number of years.

In future, though, the company’s aggressive acquisition activity is set to yield positive results for its income profile. AstraZeneca is expected to deliver bottom-line growth of 12% in the next financial year. This puts it on a price-to-earnings growth (PEG) ratio of 1.8, which suggests that it could offer good value for money. Moreover, it means that dividend growth could begin to improve from 2019 onwards. This could help to boost its dividend yield of 3.6%.

With AstraZeneca also having a defensive business profile, it could perform well in a variety of market conditions. For investors who are concerned about the outlook for the UK economy, this attribute may make it more appealing. As such, now could be the right time to buy it ahead of what may prove to be a period of stronger financial performance that leads to rising dividends.

The post Retirement saving: AstraZeneca is a FTSE 100 dividend stock I’d buy today appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of AstraZeneca. The Motley Fool UK has recommended AstraZeneca. 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.

When I last wrote about the company back in August, I dismissed it as too highly leveraged for a company that was facing down falling footfall at high street stores, stagnant consumer confidence and Brexit-related falls in property valuations.

However, the company’s full-year results released this morning offer an opportune moment to reassess my initially negative outlook. Against a tough backdrop for many peers, Capital & Regional performed very well during the latest period.

Like-for-like net rental income bumped up 1.9%, occupancy rates increased substantially from 95.4% to 97.3% year-on-year, and rising profits led to a 7.4% increase in total dividends per share to 3.64p.

And the group has continued to perform well after its December year-end with footfall at its centres up 3.1% in January and February, which was exceptional considering the national index saw footfall contract 2.9% during these months.

This is one area where I was definitely too quick to judge, as going back over the group’s entire portfolio reveals it may hold up better during a recession and against the threat of e-commerce than I expected. Much of this is due to management filling its centres with relatively low-price stores such as McDonald’s and Lidl that cater to daily necessities and should prove fairly resilient during any downturn.

On top of this possible resiliency, the stock also offers a 6.6% dividend yield and a bargain share price that today represents a whopping 18.5% discount to net asset value (NAV). While these facts certainly merit further research on my part, I must say the group’s 46% net debt-to-property value ratio is still far too high for my taste and broader trends negatively affecting the sector lead me to continue avoiding Capital & Regional. 

A larger, more diversified option 

One other REIT that’s on my watch list for offering a high yield, relatively attractive valuation and a management team that’s proving adept at reorienting its portfolio to adapt to changing consumer habits is British Land (LSE: BLND).

The company has a much larger and varied portfolio than Capital & Regional with a collection of very pricey commercial real estate developments existing alongside more high-end shopping centres. This mixed estate leaves the company more vulnerable to any economic downturn, but with its loan to value ratio down to 26.9% as of September, it has the balance sheet to withstand the next recession.

Furthermore, the group’s management team is already planning for this eventuality by disposing of non-core sites at lofty prices and returning the cash to shareholders rather than buying over-priced property. This leads to a 4.7% dividend yield for shareholders alongside a share buyback programme of £300m for the fiscal year to March.

And in the meantime the company is still reaping the rewards of a stable economy as its NAV rose 2.6% in H1 to 939p, thanks to a 1.4% valuation uplift and stable underlying profits despite large disposals. And for contrarian investors, British Land could be a bargain buy at its current share price of 635p, well below its NAV.

The post Was I wrong to avoid this dirt-cheap dividend king? appeared first on The Twelfth Magpie.

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Ian Pierce 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.

Real estate investment trusts (REITs) may seem like a risky place to invest, but they can offer high yields and low valuations. Certainly, Brexit poses a major risk for the entire sector – and potentially the whole economy. Consumer confidence has declined in the last year, while business investment also appears to be at a low ebb.

However, for investors looking to generate high levels of income and capital growth, the wide margins of safety across the sector could be hugely appealing. Here are two examples of investment trusts which could be worth buying for the long run.

Improving performance

Reporting on Tuesday was shopping centre REIT Capital & Regional (LSE: CAL). The company’s trading performance has been upbeat, with letting activity momentum being strong following an encouraging first half of the year. In the five months to 30 November there were 15 new lettings and 18 lease renewals totalling £1.9m in contracted income. Total occupancy has increased to 96.6% at 30 November, which is up from 95.5% at 30 June.

While the national footfall index has fallen by 2.7% during the 21 weeks since the company’s half-year results, footfall inside its shopping centres has increased by 0.2%. Progress is being made on its cost reduction programme, with annualised savings of £1.8m expected by 2018. This should help to improve profitability and could lead to higher dividends in the medium term.

With a dividend yield of 7.1%, Capital & Regional seems to offer one of the highest income returns in the UK stock market at the present time. As well as this, its shares trade on a price-to-earnings (P/E) ratio of just 13.3. This suggests that they may offer upward rerating potential – especially as the company is in the process of delivering improvements to its business model.

Low valuation

Also offering a mix of income and capital growth potential is fellow REIT British Land (LSE: BLND). The company has a diverse range of assets which could appreciate in value in the long run – especially if Brexit concludes with a favourable deal for the UK.

With a dividend yield of 4.8%, the company offers an income return which is in excess of inflation. Although the price level may increase at a rate faster than 3% in future, there is sufficient headroom to suggest that British Land will continue to offer a real income return over the next few years.

As well as this, the company has a low valuation. It trades on a price-to-book (P/B) ratio of just 0.7. This is 30% below its net asset value, which is exceptionally cheap when the quality of its asset base is factored-in. Indeed, it appears as though the stock market has priced-in a very poor outlook for the business which does not seem to be taking hold. As such, there could be a value investing opportunity for the long run.

The post Looking to make a million? Check out these dividend investment trusts appeared first on The Twelfth Magpie.

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Peter Stephens owns shares in British Land. 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.

As miners continue to recover from the recent commodity crash, oil explorers lick their wounds and repair their balance sheets and the major UK indices hover near all-time highs, it’s becoming increasingly difficult for income investors to find the bumper dividend yields that the LSE used to reliably provide. But that doesn’t mean there are no huge yielders left, as the 6%+ yields offered by Capital & Regional (LSE: CAL) and Redde (LSE: REDD) illustrate. But should income investors rush to buy both these options or is caution warranted?

A capital idea? 

Well, despite all the talk of weakening consumer confidence and slowing retail sales, mall owning REIT Capital & Regional continues to perform well so far. In the half year to June the company’s adjusted profits rose 6.6% year-on-year (y/y) to £14.5m, thanks to like-for-like rental income rising 0.5%, increased revenue from its centres’ car parks, and cost-cutting designed to cut the bloat from central office functions.

Together these boosted adjusted earnings per share from 1.94p to 2.06p y/y and allowed the interim dividend to increase to 1.73p. This puts the company on track to meet or exceed analysts’ forecasts for a full-year payout of 3.66p that would yield around 6.3% at today’s stock price.

However, I see a few reasons to be cautious about investing in Capital & Regional at this time. The main reason is simply the fact that macroeconomic headwinds including inflation and stagnant wage growth are building and threaten all companies reliant on healthy retail spending. We’re already seeing the effects of this in the company’s H1 results as footfall to its centres fell 0.9% y/y.

To be fair, this was better than the sector average thanks to the majority of its centres catering to more value-focused stores, but lower footfall will eventually lead to falling rents, property values and profits for the company. Furthermore, it is relatively highly leveraged even for a REIT. At the end of June the group’s loan to value ratio was 49%, compared to 22.2% for Land Securities and 29.9% for British Land. With above-average debt levels and sector-wide headwinds mounting I’ll be steering clear of Capital & Regional despite the very nice dividend yield.  

Ready-made income potential 

I’m much more interested in the 6.7% trailing yield offered by Neil Woodford-backed motor accident solutions provider Redde. The company’s business model is to serve as the outsourcer of choice for motor insurers by providing claims processing, appropriate legal services and securing temporary rental cars.

The business has been growing sales at a steady clip in recent years by bringing in new insurance customers, cross-selling and up-selling its variety of services and acquiring related companies. In addition to growing sales, the company has few fixed assets and little need for major capital investments so it’s fairly profitable and can direct the bulk all of its profits to shareholders via dividends.

In the company’s latest results, which cover the six months to December, net cash generated from operations rose to £22.3m and management paid out £14.9m of this in dividends. With net debt of just £13.5m at period end, big dividend payouts and an attractive valuation of 14.3 times forward earnings, I reckon income investors would be well served by taking a closer look at Redde.

The post One 6% yielder I’d buy and one I’d sell appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any 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.

Generating a high income return may be about to become much more difficult. Demand for high-yielding shares could rise due to a higher level of inflation. A larger number of investors may therefore seek to beat an inflation rate which is already at 2.9%, and is forecast to move higher over the medium term. With that in mind, buying these two 5%+ yielders could be a shrewd move.

Income potential

Reporting on Thursday was real estate investment trust (REIT) Capital & Regional (LSE: CAL). The company announced a trading update for the first half of the year. It showed continued growth in rental income, with further capex-driven gains expected in the second half.

Occupancy remained high at 95.5%, which is slightly ahead of the 95.4% figure as at December 2016. Like-for-like passing rent was £53.9m, which is 17% higher than from December 2016. The company’s accretive capex programme and specialist asset management platform are expected to deliver growth in income, with £1.1m of additional annual rent due to come on-stream in the next month.

Clearly, the outlook for the retail and property sectors are highly uncertain. Rising inflation could put pressure on consumer spending and lead to a slowdown in the rate of growth for the wider economy. However, with Capital & Regional having a sound strategy which has the potential to deliver growth, as well as a south east bias to its asset base, it could perform relatively well over the medium term.

Since the company has a dividend yield of 5.8%, it currently offers an income return which is twice the rate of inflation. This could lead to increased demand from investors for its shares, resulting in a higher valuation over the long run.

Value opportunity

Also offering a high income return in the long run is construction and services company Kier Group (LSE: KIE). Its shares appear to be relatively undervalued when compared to the wider industrials sector. Evidence of this can be seen in the price-to-earnings (P/E) ratio, with the company having a rating of 10.4 versus 16.2 for the wider sector. This suggests there is a wide margin of safety on offer, which could lead to relatively strong performance.

As well as capital growth potential, Kier also has income appeal. It has a forward dividend yield of around 5.5% and shareholder payouts are expected to rise by 4.4% next year. This should keep them ahead of inflation and add to the company’s income appeal. Since dividends are covered 1.6 times by profit, there could be scope for them to rise at a faster pace than earnings growth over the medium term without hurting the financial strength of the business.

As well as income and value appeal. Kier Group also has an upbeat growth outlook. It is expected to report a rise in earnings of 11% next year, which puts its shares on a price-to-earnings growth (PEG) ratio of just 0.9 at the present time.

The post Two 5%+ yielders that could make you stinking rich appeared first on The Twelfth Magpie.

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Peter Stephens 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.

With 2017 rapidly approaching, it’s time to begin thinking about your investment strategy for the next year. 

Unfortunately, 2017 promises to be yet another year of economic and political turbulence, but the one thing investors can rely on is dividends. With this in mind, here are three dividend champions to help supercharge your dividend income in 2017.

Slow and steady

Shares in Communisis (LSE: CMS) have struggled during 2016 as the company’s earnings have disappointed. Still, while management has struggled to grow earnings the group’s dividend remains in place. 

At present, the shares support a dividend yield of 5.9% and the payout is covered 3.2 times by earnings per share. With such a high payout cover there’s plenty of room for further payout growth and the company isn’t jeopardising its future growth prospects by returning all available income to investors. After payment of the dividend, there’s money left over for reinvesting in the business. City analysts have pencilled-in earnings per share growth of 13% for the company this year and 6.6% for 2017. The shares currently trade at a forward P/E of 6.9. 

Take a seat

DFS Furniture (LSE: DFS) may not be the first company that comes to mind when dividend stocks are mentioned but the sofa retailer’s 6.1% dividend yield is trying to change that. 

DFS is almost the perfect dividend stock. The company is highly cash generative and requires little in the way of capital spending to run its stores. For 2016 the firm reported revenues of £756m and a net profit of £60.3m on equity of £250m, giving a highly impressive return on shareholder equity of 24%.  

That said, DFS isn’t perfect. The company has £140m of debt but management is working to reduce this burden. Debt fell by 13% during the company’s 2016 financial year and a similar decrease is expected this year. 

City analysts are expecting DFS to report earnings per share of 23.4p for its 2017 fiscal year and to pay out 13.2p per share to investors for a dividend cover of 1.8 times. 

Property problems 

Since the Brexit vote, investors have been wary of the UK’s real estate sector and shares in real estate investment trusts such as Capital & Regional (LSE: CAL) have suffered. However, for the long-term investor, these declines have opened up some great opportunities. For example, after falling by around 20% year-to-date, shares in Capital & Regional now support a dividend yield of 6.3% and the payout is covered twice by earnings per share. Also, the shares currently trade at a deep discount to net asset value. At the end of June Capital’s reported net asset value per share was 71p, 34% above the current price. 

The reassuring thing about investing in Capital & Regional is that management owns a significant chunk of the company, and as a result has a strong motivation to achieve the best results for investors. Non-executive director Louis Norval owns approximately 25% of Capital’s shares.

The post 3 dividend champions to help your portfolio grow in 2017 appeared first on The Twelfth Magpie.

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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.

Capital & Regional’s operating profit increased by 16% in the first half of the year and this allowed it to increase dividends by 8%. This puts it on a yield of 5.8%, which is 230 basis points higher than the yield of the FTSE 100.

However, Capital & Regional’s dividend isn’t well-covered by profit. For example, in the current year it’s expected to be covered just 1.1 times by profit, which doesn’t provide a generous amount of headroom. This indicates that while dividend increases could happen in future, they’re unlikely to outpace profit growth.

On the topic of profit growth, Capital & Regional has seen no sign of challenges since the EU referendum. While this could continue and the UK property market may deliver strong results over the coming years, there’s a risk that a slowdown will ensue. Certainly, the Bank of England has taken this view. It expects the UK economy to grow by just 0.8% next year, which could hurt revenues for property companies.

Appealing yield

Furthermore, the Bank of England predicts that UK house prices will fall. This is bad news for housebuilder Berkeley Group. It’s now expected to grow its bottom line by just 1% next year and it would be unsurprising for this figure to come under pressure. Even with sterling being weaker, Berkeley may find that demand for its prime properties falls as the UK endures what’s set to be the most difficult economic period since the credit crunch.

Still, Berkeley’s yield of 39% over the next five years has huge appeal. It works out as an annualised yield of 6.8% and is based around a commitment by management to pay £10 in dividends to shareholders between now and 2021. With Berkeley generating earnings per share of around £3.90 per annum, it seems to be very well covered. As such, Berkeley holds greater appeal than Capital & Regional.

Future growth expected

However, HSBC has the most income potential of the three companies. It yields 7% and while dividends are covered just 1.15 times by profit, HSBC’s bottom line is expected to rise by 6% next year.

Beyond that, HSBC has stunning growth potential due largely to its exposure to the Asian economy. Financial product penetration is low across China and much of Asia which, when combined with the increasing wealth of the middle class, means that HSBC is well-placed to capitalise on a major growth opportunity.

Furthermore, HSBC has greater geographic diversity than Berkeley and Capital & Regional and this lowers its risk profile. It may be hurt by Brexit, but it won’t cause its bottom line to slump. As such, HSBC offers the highest yield of the three stocks, but it’s its dividend sustainability that makes it the best income buy.

The post How does Capital & Regional plc match up against the best Footsie yields? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Berkeley Group Holdings and HSBC Holdings. The Motley Fool UK has recommended Berkeley Group Holdings and HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Shares in real estate investment trust (REIT) Capital & Regional (LSE: CAL) have risen by 2% today after the company released a positive trading update. Contracted rent rose by 9.5% to £63.6m, primarily due to the acquisition of The Marlowes in Hemel Hempstead. However, even on a like-for-like (LFL) basis, Capital & Regional’s contracted rent increased by 3.2%, with it experiencing a high level of leasing activity in the first half of the year.

For example, there have been 27 new lettings and 11 lease renewals totalling £3m, with leasing momentum continuing after the EU referendum. Whether this continues over the medium term is, of course, difficult to predict. However, it seems likely that the UK economy will endure a slowdown to some degree, which could impact on occupancy rates and the valuations of Capital & Regional’s assets.

With Capital & Regional trading on a price-to-earnings (P/E) ratio of 13.7 and yielding 6.5%, it appears to offer good value for money following its recent share price fall. However, with the outlook for UK commercial property and the wider economy being uncertain, it may be prudent to wait for further news flow before buying it.

Dividend play

Also reporting today was Manx Telecom (LSE: MANX), with the Isle of Man communications solutions specialist confirming that trading in the first half of the year has been in line with expectations. Sales were slightly behind the same period of last year owing to an anticipated reduction in low-margin kit sales. However, earnings before interest, tax, depreciation and amortisation (EBITDA) were in line with last year and free cash flow grew year-on-year.

Looking ahead, Manx Telecom is forecast to record a fall in earnings of 3% this year, followed by a rise of 4% next year. Its P/E ratio of 13.5 seems to represent fair value, while a yield of 5.6% has appeal for income-seeking investors. As such, while Manx Telecom may be a sound dividend play, its shares may tread water due to a lack of earnings growth prospects over the medium term.

Buy for the long term?

Meanwhile, Gama Aviation (LSE: GMAA) also reported today. The business aviation service provider said revenues will be no less than $205m for the half year to 30 June, while EBITDA will be at least $7.5m.

These figures have been recorded during a challenging period for Gama, with Europe in particular proving difficult for the company. In the short run, the company doesn’t think that this situation will change, but believes the initiatives launched earlier in the year to optimise and right-size the European business and its cost base are already beginning to have a positive impact on its performance.

With Gama trading on a price-to-earnings growth (PEG) ratio of just 0.6, its shares offer growth prospects at a very reasonable price. And while its outlook is uncertain, such a wide margin of safety indicates that now could be a good time to buy it for the long term.

The post Should you buy Capital & Regional plc, Manx Telecom plc and Gama Aviation plc after today’s updates? appeared first on The Twelfth Magpie.

More reading

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• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Peter Stephens 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.

This is positive news for Coalfield Resources, since the price paid for the stake represents a near-20% discount to the net asset value of Haworth Estates. It also means that the seller of the 75.1% stake in Haworth Estates, the Pension Protection Fund, will become a 25% shareholder in the new entity. And, with Coalfield Resources set to change its name to Haworth Estates PLC, this could be the start of a more prosperous period for investors in the new entity, with it having delivered relatively disappointing share price performance in recent years.

Industry Peer

Of course, the UK property market has enjoyed a relatively prosperous period of late, with results released today by shopping centre operator Capital & Regional (LSE: CAL) highlighting that the sector could be enjoying a purple patch. For example, Capital & Regional has seen its property portfolio valuation rise by £36.9m in the last year, which has contributed to its bottom line rising from £7.5m in 2013 to £67.2m in 2014. This has allowed it to increase its dividend by 46%, so that even after today’s 7% rise in its share price, Capital & Regional still yields an impressive 4.2%.

Looking Ahead

However, neither Capital & Regional nor Coalfield Resources offers the size, scale and stability of British Land (LSE: BLND) and Land Securities (LSE: LAND). And, while their yields may be lower than that of Capital & Regional at 2.6% (Land Securities) and 3.4% (British Land), they offer much more consistency when it comes to the paying of dividends, with them having been paid in each of the last five years and not being subject to a cut in that time.

Furthermore, British Land and Land Securities have remained highly profitable during the last five years, while Capital & Regional and Coalfield Resources have had loss-making periods. And, with the current favourable conditions in the property market that have been caused by an ultra-loose monetary policy unlikely to last over the medium to long term, the wider economic moats of British Land and Land Securities could make a real difference moving forward.

As such, and while Coalfield Resources and Capital & Regional are companies with bright futures, British Land and Land Securities appear to be the better investments at the present time.

The post Coalfield Resources PLC Surges 50%, But Is It Better Than British Land Company PLC, Land Securities Group plc And Capital & Regional plc? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of British Land Co and Land Securities Group. 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.