Yet this particular student accommodation provider trades at a hefty discount (7% to be exact) from its 2019 peaks set in February. And this means it boasts a bargain-basement sub-1 forward PEG ratio of 0.5, a reading that also make it much better value on paper than its two big competitors.

An ‘A-grade’ stock

Surely it’s time for the market to look again at Empiric. I reckon half-year results slated for August 20 could provide a reminder of what a cracking little profits generator it is. Booking rates have certainly remained robust (at 54% as of early May for the 2019/2020 year) as have efforts to bolster operating margins.

City analysts expect the company to deliver a 38% earnings improvement in 2019 and to follow this with a 16% rise next year. And why wouldn’t their forecasts be so sunny? As latest data from UCAS showed, enrolement numbers at UK universities continue to swell at a terrific rate and this bodes well for the providers of student digs.

One final thing. Empiric has pledged to pay a 5p per share total dividend for 2019, one which the number-crunchers agree looks more than feasible. And this means the business carries a market-beating 5.4% forward dividend yield. A similar payout is predicted for 2020 as well, making the business quite an attractive income share as well as hot growth generator, certainly in this Fool’s opinion.

Another top August buy

Empiric, however, isn’t the only splendid ‘all rounder’ I’d consider snapping up today. Marshalls (LSE: MSLH) has had no trouble on the share price front of late, up around 40% since the turn of the year. Still, I reckon it could have more ground to gain next month when interims are unveiled on August 15.

Marshalls, which provides paving and landscaping products to the construction industry, certainly blew the doors off with terrific trading details last time out in May. Back then, it advised revenues had ballooned 21% in the four months to March (or 13% excluding the contribution of its newly-acquired Edenhall brickbuilding division), a rise which reflected the underlying strength of the firm’s markets and its ability to outperform competitors.

The FTSE 250 firm’s been a dependable deliverer of double-digit profits rises in recent years but, owing to the broader troubles the construction sector’s battling because of Brexit, City brokers expect earnings expansion to slow to 7% and 6% in 2019 and 2020, respectively.

I believe, though, Marshalls’s proven resilience in these tough conditions could prompt waves of forecast upgrades should those aforementioned financials, as I fully expect, impress the market.

Regardless of whether this happens, those number-crunchers expect the landscaping leviathan to remain a stellar dividend raiser. A 15.2p per share total payout is estimated for 2019, up from 12p last year.

A 2.4% forward yield might not be as impressive for investors seeking strong and sustained dividend hikes long into the future, but I think Marshalls is still a great share to bet on.

The post Dividend watch! I’m tipping these spectacular income stocks to surge in August appeared first on The Twelfth Magpie.

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Royston Wild 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.

If you’re looking for a blend of growth, income, and value then Ten Entertainment Group (LSE: TEG) is a share worthy of investment cash, in my opinion.

The popularity of ten-pin bowling with Millennials has prompted a renaissance of alleys the length and breadth of the country. It’s a relatively-inexpensive night out, meaning despite the broader pressure on Britons’ spending power, sales at Ten Entertainment are swelling (like-for-like sales were up 5.1% in the first 11 weeks of 2019).

And Ten Entertainment is harnessing this momentum by investing heavily in its existing estate and opening new arenas. Just this month, it completed the purchase of a site in Southport, Merseyside, taking the number of centres on its books to 44.

It’s not a surprise to see City analysts predicting earnings growth of 26% in 2019, a figure which leaves it dealing on a forward P/E ratio of just 11.3 times, and leads to predictions of more dividend growth. Ten Entertainment thus yields 5.2% and sits as a true income star.

Swot up

Empiric Student Property (LSE: ESP) is another share in great shape to deliver terrific profits rises in the near term and beyond. The student accommodation provider’s share price has plunged in recent months, leaving it dealing on a rock-bottom, sub-1 forward PEG ratio of 0.5, as concerns over how and when the UK exits the European Union have grown.

As of right now, though, Empiric is yet to see any impact of this on its operations. The business commented last month that “while there are economic and political uncertainties, particularly regarding Brexit, we are yet to see any material adverse consequences.”

British universities remain hugely popular with students from all over the world and are likely to continue to be so. It’s why revenues at Empiric soared 25% in 2018 and occupancy rates rose four percentage points to 96%.

Pre-tax profits almost doubled at the firm last year and City brokers are forecasting more terrific progress in 2019, a bottom-line rise of 42% currently anticipated. This bubbly estimate supports forecasts of more chubby dividends, leaving Empiric with a corresponding yield of 5.3%.

On target

My last selection is Target Healthcare Reit Ltd (LSE: THRL), a company whose yield of 5.8% for the upcoming fiscal year (beginning July 2019) makes it the best payer on this list.

City analysts expect the care home operator to generate earnings growth of 17% for the new period and, due to the UK’s rapidly-ageing population, there’s plenty of reason to expect profits to keep barrelling higher, in my opinion.

Like Ten Entertainment, Target is also committed to rampant expansion. In the first quarter alone, it opened new homes in Oxfordshire and Leicestershire. It currently has 23 tenants and expects this to rise to 26 once planned acquisitions and developments are completed.

At current prices, Target can be picked up on a forward PEG reading bang on the bargain watermark of 1 times. For a business with such scintillating growth opportunities for the years ahead, I reckon this makes it a steal.

The post 3 mega-cheap dividend heroes with yields above 5%. Can I afford to ignore them? appeared first on The Twelfth Magpie.

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Royston Wild 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.

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.

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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.

However, it’s not the only share which could beat the FTSE 100 and help you to retire wealthy. Reporting on Thursday was a cheap stock that has a bright future. As such, it could be worth buying alongside Rolls-Royce for the long term.

Impressive performance

The company in question is owner and operator of student accommodation across the UK, Empiric Student Property (LSE: ESP). The company released a trading update which showed that bookings for the 2018/19 academic year have reached 96%, which is significantly ahead of last year. New reservations are continuing, and the business is on target to reach the full occupancy goal of 97%.

The company’s plan for the facilities management of 57 properties to be brought in-house by 31 March 2019 is on track. Hello Student assumed the marketing and lettings management of the company’s entire portfolio last month, with it also being responsible for facilities management for 27 properties.

Looking ahead, the Empiric Student Property share price could move higher. It trades on a price-to-book (P/B) ratio of around 0.9, while a dividend yield of 5.2% suggests that it offers impressive income prospects. With demand for student accommodation set to remain high over the medium term, its total return potential appears to be appealing.

Changing business

The investment outlook of Rolls-Royce may also allow it to beat the FTSE 100 over the long term. As mentioned, headcount reductions are ahead, and around 4,600 employees are expected to be made redundant. This is due to create a more efficient business that is able to generate stronger cash flow. In turn, improving cash flow can be used to invest in R&D, with the company’s pipeline of new products being relatively exciting.

Demand for engines within the civil aerospace segment is likely to increase as the number of aircraft continues to grow across the globe. Similarly, defence budgets are increasing, and this could lead to greater demand for the company’s products over the coming years. In the US especially, military spending is increasing at a rapid rate under the Trump administration, and this trend is likely to accelerate should GDP growth remain robust.

Despite the growth potential which Rolls-Royce offers, its shares trade on a price-to-earnings growth (PEG) ratio of just 0.3. This suggests that there is a margin of safety on offer, and that the company’s stock price may be low. This could provide scope for it to outperform the FTSE 100 over the long term, with there being clear internal and external catalysts present.

The post Retire wealthy: why the Rolls-Royce share price could smash the FTSE 100 appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Rolls-Royce. 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.

Britain’s blue-chip index has long proved a happy hunting ground for investors seeking market-busting yields and stocks with impressive records of lifting shareholder reward. Indeed, I spend much of my time discussing some of the best income bets that the Footsie has to offer.

It’s easy to be tempted to narrow your focus on the FTSE 100 given the vast amounts of media and broker coverage that such businesses attract, giving share pickers the best chance of making the right investment decision. But restricting your search to London’s main markets means that a lot of top-class companies slip through the net.

Money master

International Personal Finance (LSE: IPF) is a little-known small cap that could fall into this category.

Sure, the business may have paid a full year dividend of 12.4p per share for three consecutive years, with City analysts predicting an identical payout for 2018 as well. But this dividend still yields a very handsome 5.5%.

What’s more, this forecast payout also looks pretty secure, being covered 2.5 times by predicted earnings (inside the widely-accepted security area of two times and above).

Added to this, a suspected return to profits expansion in 2019 leads to City expectations that it will finally have the strength to lift the dividend again, a 12.6p reward currently anticipated. This yields 5.5% and is covered 2.6 times by anticipated profits.

It’s easy to see earnings, and thus dividend expansion, accelerating beyond next year too, as it embarks on its ambitious growth strategy (issued credit growth in IPF Digital’s new markets climbed 33% from January to June, for example).

Another secret dividend star

I’m convinced that Empiric Student Property (LSE: ESP) should also continue delivering yields above the broader market.

As I noted last time out, the UK’s universities have a reputation for being the best in the world and as a consequence, students from all around the world flock here in massive numbers. And Empiric is expanding its operations to benefit from this rush.

The company operates in almost 30 of the best university locations up and down the country, and in the first fiscal half it boosted the number of assets on its books to 95 following the acquisition of a location in Southampton. As of June, it operated 9,398 beds versus 9,158 in the corresponding 2017 period.

Back in November, Empiric announced its intention to pay reduced dividends as part of a bid to build dividend cover, and advising that it would follow last year’s 5.55p per share reward with a 5p reward in the current period.

It’s worth noting, though, that such a figure still yields a mighty 5.1%. And City projections for an identical payment in 2019 means that the yield remains elevated.

Empiric’s forward P/E ratio of 28.6 times means it is far costlier than International Personal Finance, the latter sporting a corresponding readout of 7.4 times. I am convinced that both are great selections for those looking to generate a fortune by retirement, however.

The post Forget about FTSE 100 dividend stocks! These little-known 5% yields could finance your retirement appeared first on The Twelfth Magpie.

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Royston Wild 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.

Latest data from the Universities and Colleges Admissions Service (UCAS), the body which handles applications for higher education in the UK, showed on Thursday that a record 75,380 overseas students (excluding those from the EU) have applied to study here, up 6% from the same point in 2017.

Meanwhile, those applying to study from inside the EU have increased 2% from the corresponding period last year, UCAS added, to 50,130 individuals.

It is too early to say how application numbers from the latter group will alter in the years ahead, given the state of Brexit negotiations and how favourable conditions will end up being for EU nationals. But the latest figures suggest that aggregate demand for university places from those from abroad should remain strong.

Big, big yields

This backdrop makes the likes of Empiric Student Property (LSE: ESP) a great investment destination, in my opinion.

Mirroring the buoyant numbers from UCAS, the student accommodation provider declared in recent days that bookings for the 2018/19 academic year stood at 73% as of June 30, up from 63% at the same point last year. Empiric said that it’s now on track to hit full occupancy for the upcoming academic period.

With the business also stepping up efforts to slim down its cost base, it would appear to be in a strong position to generate solid profits growth in the medium term and probably beyond. While a 9% earnings slip is forecast for 2018, Empiric is predicted by City analysts to rebound with a 50% bottom line advance in 2019.

A bright profits outlook is also allowing the small-cap to continue doling out generous dividends. Rewards of 5p per share are forecast for both this year and next, meaning investors can drink in a bumper dividend yield of 5.5%.

Empiric’s forward P/E ratio of 26.1 times may be expensive on paper, though I reckon the rate at which overseas student numbers continue to grow makes the business worthy of this premium.

Great value. Terrific dividends

Investors seeking classic value plays may want to give Randall & Quilter Investment Holdings (LSE: RQIH) a look, instead.

Thanks to predictions of a 30% earnings jump in 2018, the insurance giant can be picked up on a forward P/E ratio of just 12.1 times — comfortably inside the value terrain of 15 times or below — as well as a corresponding sub-1 PEG reading of 0.4.

This is particularly cheap given that the AIM-quoted stock is in great shape to deliver strong and sustained profits growth, thanks to its robust new business pipeline (a 32% earnings improvement is anticipated for next year).

Reflecting this strong outlook, Randall & Quilter is predicted to fork out a 9.1p per share dividend this year, an estimate that yields 5.5%. And this readout leaps to 5.7% for next year due to the predicted 9.3p payment.

The post Two 5%-plus dividend yields I’d buy now and hold for 10 years appeared first on The Twelfth Magpie.

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Royston Wild 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.

As such, stocks that could offer strong income returns over the long run may prove popular with yield-hungry investors. With that in mind, here are two real estate investment trusts (REITs) that could deliver high returns.

Solid performance

Wednesday saw student accommodation specialist Empiric (LSE: ESP) deliver a solid trading update. The company continues to deliver on its financial and operational improvements, with bookings for the 2018/19 academic year growing strongly. They are currently at 57% versus 45% at the same time of the previous year, with the company on target to meet its goal of 97% occupancy for the 2018/19 academic year.

The company has also been able to improve its operating margin. It is delivering on its cost savings goals and is on track to reduce administration expenses by £10m in the 2018 financial year. This would represent a fall of 26% from the prior year and could lead to improving financial performance over the medium term.

With a dividend yield of around 6%, Empiric appears to offer a strong income outlook. While there may be companies that can offer a faster pace of dividend growth, the resilient nature of its business model, plus its ongoing self-help measures, mean that it could be a sound income play for the long run.

Dividend growth

Operating within the same sector is Unite Group (LSE: UTG). The UK’s leading provider of affordable housing for students and keyworkers has delivered a stunning rate of dividend growth in recent years. For the period 2013-17, dividends per share increased by around 47% per year. This puts the stock on a dividend yield of around 3.5% at the present time, which remains significantly above the rate of inflation.

Looking ahead, further dividend growth could be on offer. Unite Group is expected to generate earnings growth of 13% per annum over the next two years. This is forecast to catalyse its dividend so that it rises by almost 20% per annum during the same time period. As such, a rising yield could be on offer for investors at a time when interest rates could remain relatively low.

Since demand for student property is expected to be relatively resilient even if Brexit causes difficulties for the wider economy, the risk/reward ratio offered by Unite Group could be highly attractive. As such, buying it now for the long term could be a means of outperforming the FTSE 100 in future years.

The post 2 dividend investment trusts that look set to crush the FTSE 100 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.

Profit did fall, as predicted, but adjusted pre-tax profit only dipped modestly from £19.5m to £18m, with diluted EPS down just a smidgen from 21.2p to 20.7p.

The company has been suffering from a falloff in its ceramic tile decoration business and is in something of a transformation period, but it’s seeing revenue growth from new products. In fact, the seven new products launched in the last two years, plus the acquisition of Engineered Printing Solutions, brought in 80% of 2017’s total product revenue.

Overall revenue actually rose slightly, by £3.9m to £100.1m, and I see that as a sign that Xaar really is turning the corner since a profit warning sent its shares tumbling back in November — as, apparently, does the market.

Turnaround

Looking at the firm’s new products, it saw a “strong performance” from its 1201 thin film printhead, with a two-year distribution agreement for 90,000 units in the bag. And there was good progress from the 5601 thin film printhead development too, with the design frozen and the first development kits shipped to eight partners.

Analyst forecasts are a bit up in the air at the moment, with a 40% drop in EPS indicated for 2018. But I can see that being adjusted more optimistically now, and the 46% EPS rise pencilled in for 2019 could be edging closer.

The 2017 dividend was lifted by only 2% to 10.2p, to yield 3.8% on the previous close, but its growth is expected to accelerate in the next couple of years. And over the medium term, it’s well ahead of inflation, up 27.5% in four years.

Back in front?

Speaking of turnarounds, the past five years haven’t been good to Empiric Student Property (LSE: ESP) shareholders. Though the price was riding high in September last year, first-half results from the real estate investment trust (REIT) were not taken well, and the share price has since slumped. At 87p as I write, the shares have gone nowhere overall since flotation in 2014 — but there’s at least been around 9% in dividends in total.

After an operational review in November, the trust cut its dividend target for 2017 from 6.1p per share to 5.6p, and it’s just announced an actual payment of 5.55p. At the time, Empiric reckoned it had grown too fast and overstretched itself, and on Wednesday confirmed that its 2017 operating margins and dividend cover were “reduced by a number of financial and operational inefficiencies within the Group and its supply chain.“

Dividends adjusted

The target dividend is now set at 5p per share for 2018, which will disappoint some. But I see it as a sensible step while the company refocuses, and one that will help it achieve progressive dividend rises above inflation in the long run — especially when the current shakiness in the property market starts to settle.

Meanwhile, the company’s portfolio valuation stood at £890.1m at 31 December, up from £721.3m a year previously, with year-end net asset value (NAV) per share at 104.37p.

That puts the shares on a discount to NAV of nearly 17%. REIT shares typically trade at a discount, but I think that gap is too wide, and I see Empiric Student Property as a good pick to beat inflation over the next decade.

The post 2 inflation-busting small-cap dividend stocks I’d buy with £2,000 today appeared first on The Twelfth Magpie.

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• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Alan Oscroft 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.

Half a century of increases 

A great example is the Brunner Investment Trust (LSE: BUT). This investment group, which reported its results for the year to the end of November this morning, has paid a dividend to investors for 46 years and it has increased the payout every single year. Today management continued this record, announcing a 4.4% increase in the total payout for the year to 16.5p, well covered by earnings per share of 18.4p. The increase, coupled with the firm’s record of steady payout growth, shows how valuable investment trusts can be for income investors seeking a steady income that’s growing in line with inflation.

The full-year distribution suggests a dividend yield of 2.2% which is hardly high-yield territory, although I believe that the record of payout increases more than makes up for this. 

Brunner is well diversified with three of its top five holdings based in the US and more than two-thirds of its holdings being international securities. Also, the management fee is a relatively attractive 0.8% per annum, and the shares trade at a 9.9% discount to net asset value. Overall then, I believe Brunner, with its low management fee, international diversification and a near 50-year record of steady dividend increases, is an excellent investment for investors looking to protect their portfolio in the current environment.

Student income 

Another income investment I’m positive on the outlook for is Empiric Student Property (LSE: ESP). Strictly speaking, this is not a pureplay investment trust. It is a real estate investment trust which is virtually the same apart from its requirement that the majority of its income must be derived from property.

Unfortunately, of late the company has had to curtail its expansion plans after several years of rapid growth have resulted in a bloated cost structure. However, management is now taking actions to reduce costs, and according to a trading update published today, administration costs for the second half of 2017 were reduced by 21% from the first half. Meanwhile, bookings for its student accommodation properties are now at 40% for the 2018/19 academic year, which is “significantly ahead of last year.“

Management also noted in today’s trading update that the value of the group’s property portfolio was £890m at the end of December, up by 23.4% for the year. Based on the last reported net asset value, the shares are trading at only 0.95 of tangible book value.

City analysts are expecting the trust to announce a dividend of 5.55p per share for 2017 and 5p for 2018, giving a forward dividend yield of 6%, nearly double the market average.

All in all, Empiric offers a defensive income stream from property, trades at a discount to its net asset value and the trust’s dividend yield is a healthy 6%. This is why I believe that if you are looking for income, this company will make a great addition to your portfolio.

The post Protect your portfolio with these 2 top investment trust for income seekers appeared first on The Twelfth Magpie.

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• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

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.

Shares in pub group Mitchells & Butlers (LSE: MAB) are sliding after the company reported a decline in profits for the financial year ending 30 September 2017 and cut its dividend for the current fiscal period. 

Thanks to rising costs, adjusted operating profit for the year to the end of September fell 3.1% to £314m and adjusted earnings per share declined 1.4%. On the plus side however, revenue growth of 1.8% for the period helped offset some of the declines.  

According to CEO Phil Urban, profits have fallen as “cost headwinds across the industry have adversely affected margins, but we continue to work hard to mitigate as much of these as possible through our focus on efficiency and profitable sales growth.“

Unfortunately, due to the company’s efforts to improve efficiency, management has decided to eliminate the group’s interim dividend to investors “pending assessment at year-end of capital allocation and prospects.“

For the period just ended, management has recommended a payout of 5p per share, giving a yield of 1.5% at current prices. City analysts had been expected the shares to yield 3% for the fiscal year ending 30 September 2018. 

Waiting for a payout 

Even though today’s dividend announcement is disappointing, I’m still positive on Mitchells’ income outlook. According to prior year figures, the firm only paid out £31m in dividends to investors for 2016, and £12m for 2017. These distributions were easily covered by cash flow from operations. Across both years the company generated a free cash flow of around £159m. 

These numbers suggest to me that management will be able to reinstate the dividend within the next few years. In the meantime, investors can buy the company today at a lowly valuation of only 7.5 times forward earnings — a valuation that looks too cheap to pass up. 

Another dividend champion that’s seeing its shares crumble today after cutting the payout is Empiric Student Property (LSE: ESP). Management had been targeting a dividend payout of 6.1p for 2017, but is now reducing this to 5.6p and then 5p for 2018. Even though this reduction is disappointing, a payout of 5.6p still gives a dividend yield of 6.1% at current prices. 

Long-term defensive income

Once again, this dividend cut looks to be a sensible decision that should help the REIT raise the payout in future. 

Following an operational review, management has concluded that the group has grown too fast and “a number of operational inefficiencies” have “adversely impacted performance.” A review of the operating structure, building sales and cost cuts are expected to put the business back on track, but it will take some time for these changes to hit the bottom line. 

Over the long run, these adjustments should pay off and in the near term, management is still targeting a total annual return of 10% per annum through both income and net asset value growth. 

The last reported net asset value was 105p so at today’s price of 92p, for value investors focused on long-term defensive income from property, Empiric Student could be a great buy.

The post 2 hot income stocks I’d buy yielding up to 6% appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no 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.