These 5%+ yielders could make you a million

Alan Oscroft — Fri, 23 Jun 2017 13:44:13 +0000

I’ve always said it’s better to choose your own shares than put your money under the control of an investment manager, as you stand to do better than most and won’t be paying any fees for the service.

The converse is that buying shares in investment managers can be good for your wealth — instead of paying fees, you’re getting a cut of them for yourself.

Premier Asset Management (LSE: PAM) only floated on AIM in October 2016, yet the share price has already risen by 17.5%, to 156.5p, and I reckon there should be a lot more to come.

At the interim stage, the firm reported £311m in net inflows for the six months, with £667m over a rolling 12-month period. That’s 16 quarters of net inflow in a row now, which is an enviable record to have.

Impressive performance

Assets under management (AUM) are on the up too, growing by 11% to £5.5bn. And over the past five years, 96% of Premier’s AUM were performing above median levels with 80% in the top quartile. That’s the kind of performance that’s likely to keep those inflows going.

Pre-tax profit for the period climbed by 32% to £6.25m, for earnings per share of 3.03p, with analysts forecasting around 11.5p for the full year.

A number of Premier’s funds are targeted at above-average income yields, and the company apparently intends to treat its shareholders similarly. At flotation time, we were told of a dividend policy “that reflected the expectation of future cash flow generation and the long‐term earnings potential of Premier.“

That seems to be coming good, with a 5% dividend yield forecast for this year and a nice boost to 7.3% on the cards for 2018.

Student property

My second high-yield pick today is Empiric Student Property (LSE:ESP), which is in the profitable and cash-rich business of owning and operating UK student accommodation.

Dividend yields are progressive, with yields of 5.4% and 5.5% predicted for this year and next. The firm has already told us it is targeting a payment of 6.1p per share for 2017, so that at least should be safe.

In the past couple of years the dividend has not been covered by earnings, but Empiric is paying out cash as property income distribution under Real Estate Investment Trust rules, and earnings look set to rise above the dividend in the near future. So over the long term, I see this as a potentially very rewarding income investment.

Growth too?

That’s not to say there won’t be any capital growth, because it’s looking like we’ll get that too. A revised investment policy should see the company “able to acquire or develop a more diverse range of student accommodation formats, catering for students from their first year as undergraduates to postgraduates, both UK and international.“

At December 2016, Empiric enjoyed a relatively modest loan-to-value ratio of 31%, and boasted a net asset value of 105p per share — the shares are currently priced at 114p, for a price-to-book value ratio of a bit less than 1.1, which looks attractive to me.

A forward P/E of 18 for 2018 might look a bit high compared with the FTSE average, but with the new development plan in place, the value of Empiric’s property portfolio rising, and those high and progressive dividends looking solid, I reckon the shares are good value now.

The post These 5%+ yielders could make you a million appeared first on The Twelfth Magpie.

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Alan Oscroft 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.

Two 5%+ dividends that could help you become a millionaire

Peter Stephens — Tue, 06 Jun 2017 13:03:56 +0000

With the inflation rate reaching 2.7% last month, it is becoming increasingly challenging for investors to generate a real-terms income return. Looking ahead, the rate of inflation is forecast to move higher. An uncertain period for the UK in a political sense could cause a further weakening of the pound. This, in turn, may lead to higher import prices which are then passed on to consumers in the form of higher inflation.

Given this backdrop, buying higher-yielding shares could be a shrewd move. Here are two stocks which could be worthwhile income plays.

Improving performance

Reporting on Tuesday was owner and operator of student accommodation across the UK, Empiric (LSE: ESP). The company’s trading update showed that it is making solid progress with its current strategy. Its net asset value (NAV) per share increased to almost 108p from just under 106p as at 31 December 2016. This puts the company’s shares on a price-to-book (P/B) ratio of just over one, which indicates that they offer excellent value for money.

The company’s development pipeline is on track. It is anticipating an annual rental uplift for the 2017/18 academic year of around 2.8%, which is likely to be a similar level to inflation. Its property portfolio has been valued upwards versus its December 2016 level. It now stands at £786.7m compared to £721.3m at the end of last year.

Looking ahead, Empiric is aiming to deliver a dividend per share of 6.1p for the full year. This puts its shares on a dividend yield of 5.5%, which is more than twice the current rate of inflation. As such, they could offer a strong income return, as well as the scope for capital gains.

Bargain buy

While the prospects for the UK property sector have deteriorated, the buying opportunity for long-term investors may have improved. For example, Berkeley Group (LSE: BKG) continues to trade on a low valuation with a relatively high yield. Certainly, the prospects for the prime property market have worsened in recent months. The potential exodus of financial professionals and the uncertainty brought about by Brexit may lead to lower demand for prime property, but weaker sterling could help to offset this somewhat by encouraging foreign buyers to invest.

With Berkeley now trading on a price-to-earnings (P/E) ratio of 7.3, it appears to offer a wide margin of safety. Its dividend yield stands at over 6%, and yet is covered more than twice by profit. This suggests its future dividend payments are highly affordable and could provide an inflation-beating income stream for the company’s investors over a sustained period.

Although UK house prices may fall and this may lead to some share price volatility in the near term, Berkeley appears to offer a mix of value and income potential for the long run. As such, even after a 12% rise since the start of the year, its share price could move higher.

The post Two 5%+ dividends that could help you become a millionaire appeared first on The Twelfth Magpie.