Forget buy-to-let! I’d much rather buy these property stocks and their BIG dividends

Royston Wild — Wed, 28 Nov 2018 14:32:17 +0000

In years gone past, buy-to-let was one of the best places that one could stash their cash. Ordinarily speaking there have been few investment destinations as effective as bricks and mortar, with surging property prices also helping to drive rents sky high, and physical property, of course, proving far less volatile than, say, investing in cyclical commodities or the stock market.

But diving mortgage demand for rental purposes more recently suggests that the popularity of buy-to-let is heading through the floor. And it’s no surprise to this Fool as rising regulation and increasing tax liabilities (a government response to the chronic homes shortage for first-time buyers), provide landlords with an increasingly-painful headache.

Housing hero

There’s no shortage of stocks out there which, in my opinion, are better ways to get exposure to property-based investments. And right now I consider real estate investment trust (REIT) Civitas Social Housing (LSE: CSH) to be one of the best.

The creation of affordable housing is a hot topic for government. There simply isn’t enough of it to go around, and this is illustrated by changing policy towards it at Number 10. Amongst the measures announced recently is the creation an extra £2bn worth of funding earmarked for housing associations to boost build rates over the next decade, giving the long-term trading outlook at Civitas an extra boost.

What’s more, the FTSE 250 company’s robust balance sheet is allowing it to aggressively build its property portfolio. It’s embarked on a flurry of further acquisitions over the past few months, the latest of which in early November saw it snap up three regulated social housing properties leased to Auckland Home Solutions for £3.7m.

Its rampant M&A drive is expected to deliver a 270% earnings bump in the year to March 2019, and I believe the likelihood of more action in the New Year could see the 4% increase forecast for fiscal 2020 upgraded sooner rather than later.

It deals on a dirt-cheap forward PEG reading of 0.1 and carries bulky dividend yields of 4.7% this year and 4.8% next year too.

Student digs

GCP Student Living (LSE: DIGS) is another attractive REIT worthy of investment today, I feel. Like Civitas, its cheap, an anticipated 30% earnings improvement for the provider of student accommodation in the year to June 2019 producing a prospective PEG reading bang on the bargain benchmark of 1.

And in the current period, it also sports an inflation-bursting dividend yield of 4% too, and I’m confident that it can keep delivering impressive profits growth and market-beating dividends long into the future.

Britain has always been, and will remain, an attractive destination for students from all over the world, a point perfectly illustrated by strong admissions from foreign visitors even in spite of the uncertainties created by Brexit. And with more than nine-tenths of GCP’s portfolio (which comprises of 10 assets housing some 3,600 beds) by value being in and around London, the demand outlook for its accommodation is given that little extra security.

As of June 2018 the value of the company’s property portfolio was £784.4m, up 7.3% on a like-for-like basis and driven by full occupancy rates, rental growth and yield compression. GCP has proven it has the knack of outperforming the broader student accommodation market and I am confident that it will prove a great share to buy today and hold in the years to come.

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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.

2 top-performing investment trusts for dividend investors

Peter Stephens — Fri, 15 Sep 2017 10:36:28 +0000

With inflation forecast to rise yet further after its increase to 2.9% last month, dividends are likely to remain of high importance to income investors. Certainly, the chances of an interest rate rise appear to be higher following the Bank of England’s Monetary Policy Committee meeting this week. However, the reality is that a 0.25% rise in rates may be insufficient to curb a higher rise in the price level.

As such, buying stocks with upbeat income outlooks could be a wise move. With that in mind, here are two investment trusts with strong dividend potential.

Solid performance

Reporting on Friday was student accommodation real estate investment trust (REIT) GCP Student Living (LSE: DIGS). The company was able to deliver a robust set of results for the most recent financial year, with revenue increasing from £22.5m in the prior year to £28.6m. This was backed-up with a flat operating margin of 79%, while rental growth of 3.9% shows that the company’s operating environment remains resilient.

Net asset value per share increased to 139.08p from 136.93p in the prior year. More growth on this front could be ahead as there remains considerable upward pressure on property across the UK. And since GCP Student Living has a share price of 147p at the present time, it seems to offer a wide margin of safety via a price-to-book (P/B) ratio of just 1.05. This suggests that share price growth could be ahead.

With the company having a dividend yield of 4%, it is likely to offer a positive real return over the long run. Alongside its growth potential and resilient business model, this could increase demand for its shares in future. With a continued imbalance between demand and supply within the UK property sector, the stock could be a solid buy-and-hold for the long run.

Global appeal

Looking ahead, Brexit could have a significant impact on the UK economy. Already, it has contributed to a slowing growth rate, as well as a weaker pound and higher inflation. As such, putting your money into in an investment trust with a global focus could be a sound move to make.

One that has a global outlook is the Witan Investment Trust (LSE: WTAN). It maintains some exposure to UK equities through a 37% holding of UK stocks, but also has a range of other funds and shares within its portfolio. For example, it has a 21% exposure to North America at a time when the US economy appears to be performing well. Higher spending from the Tump administration coupled with the prospect of lower taxes could stimulate the economy yet further.

The company also has a 19% exposure to European equities. Although the impact of QE on the eurozone should not be underestimated, the region appears to offer growth potential. It should help to boost dividend payments in future. And although the Witan Investment Trust currently yields 2%, its dividend growth rate could be relatively high in the long run.

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