Based on consensus forecasts for a 2018 payout of 25.6p per share, Standard Life stock now offers a prospective yield of 9.9%. A dividend yield this high usually means one of two things. Either the share price is too low, or the dividend is going to be cut.

I can see value

In my last piece, I noted that the group’s share price was supported by the value of a £1.3bn stake in India’s HDFC Asset Management and a roughly £1bn stake in FTSE 250 insurance group Phoenix.

Falling share prices mean that I estimate that these holdings are worth about £2bn today. Subtracting this from Standard Life’s £6.75bn market cap gives us a valuation of £4.75bn for its core asset management business.

This division generated an adjusted profit after tax of £250m during the first half of 2018. If the second-half performance is unchanged, then the group’s continuing business is trading on a modest price/earnings ratio of about 9.5.

The dividend could be at risk

What concerns me is that the group’s dividend could be cut. This year’s forecast dividend of 25.6p per share is 97% of forecast earnings of 26.3p per share.

One possible solution is that the ongoing £750m share buyback will solve the problem. I estimate this could cut the group’s share count by as much as 10%, lifting earnings per share and cutting the total dividend bill.

We’ll know more in the New Year. For now, I’m maintaining my income buy rating on this stock.

This 7% yield could be a bargain

The share price of shopping centre owner Intu Properties (LSE: INTU) has fallen by more than 30% since the start of 2016.

Shareholders’ losses would be even worse, except that the group has received a possible offer of 210.4p per share from a consortium which includes Peel Group, the largest shareholder.

Intu’s board hasn’t yet decided whether to recommend the offer. But the company came out fighting today with a trading statement which suggested that demand for its properties remains strong.

Rents up 8%

The group signed 84 long-term leases during the third quarter, at an average rent of 8% above the previous rate. Occupancy remains high, at 97%. And although footfall is down by 1.3%, the company says that its growing web presence is helping to stimulate online sales for retailers in its properties.

The only bad news was that market values for retail properties are still falling. The group’s preferred measure of net asset value fell by 3.9% to 297p per share during the third quarter. This follows an 11% drop from 349p during the first half of the year.

What should you do?

One concern for me is that Intu’s loan-to-value ratio has now risen to 50.6%, higher than rivals such as British Land (28%) or Land Securities (25.8%).

A second concern is that if the takeover offer fails, the shares could fall back to the 150p level seen at the start of October.

Although I’m tempted by the stock’s 33% discount to book value and 7% yield, I don’t see much point in buying until the outcome of the Peel Group-led offer is known.

The post Warning: the Standard Life Aberdeen share price now yields 9.9% 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, Landsec, and Standard Life Aberdeen. 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.

Today, I’m going to look at the numbers behind the stock’s 9% dividend yield and ask whether the market is being too cautious. I’ll also give my verdict on another property stock with a near-9% yield.

Demand remains strong

Persimmon’s sales rose by 5% to £1.84bn during the first half of the year. Pre-tax profit was also 13% higher, at £516.3m.

This growth was driven by a 4% increase in new home sales, which rose to 8,072. Average selling prices also edged higher, rising 1% to £215,813.

Demand for new homes still seems strong. The firm’s order book rose by 6% to £2.12bn during the half year, while management bought a further 7,860 plots of land for future development.

Operating margin for the period was 27.9%, ahead of last year’s 26.5%. This impressive result helped to bolster the group’s net cash balance, which was £1,154.6m at the end of June.

Too dependent on Help to Buy?

Today’s announcement didn’t reveal how many sales were made to buyers with Help to Buy mortgages during the first half of 2018. But in 2017, 47% of the group’s sales benefited from these government loans.

The current Help to Buy programme ends in 2021. There’s no guarantee of whether the scheme will be continued, and this is reflected in today’s dividend guidance. Persimmon plans to return 235p per share to shareholders in 2019 and 2020, followed by a minimum of 110p per share in 2021.

Should you be buying?

Trading remains robust and the forecast dividend yield of 9.6% makes the stock look very cheap. But I think the market is starting to price in a housing downturn.

This year’s dividend income has been cancelled out by the 10% share price slump seen so far in 2018. And it’s worth remembering that Persimmon stock now trades at a lofty 2.7 times its book value.

I don’t see much value here, although I would rate the stock as a hold for income.

Bargain buy or value trap?

Property stocks are traditionally seen as value buys when they trade at a discount to book value. Shopping centre owner Intu Properties (LSE: INTU) fits this description. Its shares currently trade at a 48% discount to the firm’s industry-standard EPRA net asset value of 309p.

Alongside this discount, Intu stock boasts a forecast dividend yield of 8.7%. So why aren’t I buying?

The first problem is that Intu’s net asset value fell by 11% during the first half of the year. I fear this could be the first of several downgrades needed to reflect the falling rental value of many retail units.

The recent failure of House of Fraser has highlighted the problems facing big retailers. New owner Mike Ashley is certain to be negotiating lower rents on the stores he decides to keep open.

My second concern is that the group’s loan-to-value ratio of 48.7% is quite high. Falling property values and flat rental income mean that this debt ratio could easily rise further. I think a dividend cut is likely at some point.

On balance, I expect more bad news before things start to improve. So, for now, I’m avoiding this potential value trap.

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Roland Head 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.

Resilience

Landsec (LSE: LAND), the UK’s largest listed commercial property company, is no exception — its shares trade at 35% discount to its adjusted dilute net asset value of 1,403p per share. And that’s in spite of the underlying resilience of its investment portfolio and strong leasing activity in recent months.

Adjusted diluted earnings per share, a measure of underlying profitability, increased from 48.3p last year, to 53.1p, on the back of the completion of new developments and a reduction of interest costs. The company even managed a 14.7% boost to its full-year dividend to 44.2p, giving its shares a yield of 4.8%.

Valuation movement

Investors were perhaps more concerned about the 1% decline in its net asset value for the year. The value of its investment portfolio fell by 0.7%, giving Landsec a valuation deficit for the year of £91m.

However, the net asset value decline also reflected the refinancing of £1.5bn worth of legacy debts. This was a case of short-term pain for long-term gain, as it lowered its weighted average cost of debt to 2.6%, from 4.2% last year.

Retail sector

Also offering investment potential within the sector is Hammerson (LSE: HMSO). The retail-focused REIT, which recently dropped its plans to buy rival shopping centre owner Intu Properties (LSE: INTU), is reshaping its strategy in an attempt to unlock value for shareholders.

Hammerson’s bid to buy Intu failed as it was unable to garner significant shareholder support amid fears of the heightened risks of the proposed merger. Now, the company could itself be looking at further asset disposals as it seeks greater exposure to higher-growth segments of the retail market and assesses the potential for greater cash returns to shareholders.

It has so far announced plans to exit the retail park sector over the medium-term and initiated a £300m share buyback programme. With shares currently trading at a 37% discount to net asset value of 776p per share, there’s significant potential upside from a re-rating of its shares as the company repositions its property portfolio.

Intu

Unsurprisingly, Intu’s shares have fared even worse following the aborted takeover by Hammerson. Shares in the company trade at a 56% discount to net asset value of 362p per share, reflecting concerns about the group’s high leverage and falling property valuations.

In the six months of 2018, Intu took a massive £650m property revaluation hit, as the market value of its investment properties dropped from £10.5bn, to £9.8bn. Aside from the obvious impact to net asset value, which fell by 12% over the period — more worryingly, the valuation deficit also inflated its debt to assets ratio to 48.7%.

If property valuations continue to trend downwards, Intu, which already has an above-average financial gearing in the sector, could be forced to raise equity or cut dividends to prevent its loan-to-value ratio from exceeding 60%.

Intu’s shares are currently one of the highest-yielding in the REIT sector, with a yield of 8.8%.

The post Income investors: 3 embarrassingly cheap REITs with yields of up to 8.8% appeared first on The Twelfth Magpie.

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Jack Tang has positions in Landsec and Hammerson. The Motley Fool UK has recommended Landsec. 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.

But they’re still up more than 55% over five years, which includes a big Brexit dip in June 2016. Fears that Brexit would lead to a house price collapse subsided soon after the vote and the slump was reversed pretty quickly, and I don’t see current fears of a significant downturn bearing fruit either.

My colleague Peter Stephens has explained that, with UK economic growth looking feeble and consumer confidence weakening, there’s a fair bit of uncertainty surrounding the outlook for the housing sector at the moment. And the fact that Brexit itself is now only eight months away seems likely to bring those mid-2016 fears back into focus.

Buy or sell?

So, are you likely to be burned if you buy Taylor Wimpey shares now? Well, the number of houses on the market has been falling for most of this year as fewer people look to move upwards — and slowing house prices are continuing to dissuade folks from selling. 

Yet the market for new houses seems to be stable. According to Taylor Wimpey chief executive Pete Redfern in the most recent update at the end of April, the firm has “continued to see good demand for new housing through early 2018.” Mortgages are still readily available, and interest rates are at long-term lows.

Earnings growth at the company is forecast to slow considerably, but that still leaves a forward P/E of under nine for a stock set to deliver dividends in excess of 8% and rising. The next few months could be a great time for bargain hunters. 

Commercial property

Shares in commercial property firm Intu Properties (LSE: INTU) have fared far worse than Wimpey’s, losing more than half their value in a little over three years. And that wasn’t helped by a 7% dip Thursday on the day the firm’s first-half figures were released.

The numbers themselves seemed overshadowed by news of the departure of chief executive David Fischel, after a planned merger with Hammerson (LSE: HMSO) came to nothing. The initial offer would have seen Hammerson take over the shopping centre manager for around £3.4bn, but ultimately, aborted bids by French rival Klépierre led to the whole thing being called off.

Intu was left with costs of £6.3m relating to the incident, essentially in legal fees and advisors’ charges, and that didn’t help a first-half update which spoke of weakening sentiment in the retail market causing an impact on shopping centre valuations.

Rental fine

On the upside, an occupancy level of 97% was impressive, and like-for-like net rental income grew for the fourth consecutive year, even if only at 1.3%. 

But what probably spooks investors the most is a £650m asset hit from property revaluation leading to a fall in adjusted net asset value per share from 411p at 31 December to 362p.

On the earnings front, things were flat with underlying EPS unchanged from a year previously at 7.3p, and the interim dividend was held at 4.6p per share.

Looking forward, P/E ratios of around 12 seem reasonable to me considering the increasing weakness in bricks-and-mortar retail, but forecast dividend yields approaching 8% do grab my attention. I still see Intu as a decent long-term investment.

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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.

TriConnex, which works in the energy, water and fibre networks field, has seen a 44% rise in its order book. But it’s experiencing unexpected delays in turning those orders into works in progress. Projects are taking longer to get under way on-site, apparently due to extra layers of red tape being imposed in the early pre-construction stages.

Though that might sound worrying in the short term, the result is only likely to be a flat year for the infrastructure engineer, with revenues and operating profit for the full year now expected to come in only around 2017’s levels. That’s below previous expectations.

But the order book is still predicted to grow further by the end of this year, “based on the current pipeline opportunities,” and with the division’s contracts generally covering four to five-year periods, the longer-term outlook still looks pretty healthy to me.

The firm’s other division, Tamdown, which focuses on things like highways and drainage systems, is still on track to meet previous expectations.

Nexus boasts a total order book of £234.1m, for a 30% year-on-year increase, and is predicting revenue and operating profit for the first half ahead of the same period in 2017.

While EPS forecasts are likely to dip a little now, from the current consensus of a 14% gain, I think we’re still looking at a bargain valuation. By the end of the 2019 year, the forward P/E multiple is likely to be around 10, and that looks attractive to me.

Big dividend

What better to accompany a growth prospect like Nexus than a top dividend payer? The one I have in mind at the moment is Intu Properties (LSE: INTU), a real estate investment trust (REIT) investing in shopping centres. It’s offering forecast yields of around 7% for this year and next.

There are two things I like generally about REITs. One is that they provide a great way for investors to get some of their cash into the commercial real estate market without having to be wealthy enough to buy a whole shopping centre or a factory. And even those who can afford to do so should face considerably less risk as part of a big and diversified portfolio.

The other thing I like is that investment trust rules allow the company to smooth out its dividend payments over the long term, which can be a boon in this kind of business where earnings can be lumpy over the short term.

On that score, I see one of Intu’s strengths as being its record of steadily progressive dividends. Rises have only been modest, but with consistently decent yields, I see that as fine.

Priced at 197p as I write, Intu shares are on a forward P/E of around 13.6, and that’s expected to drop slightly by 2019. That’s a middling valuation, but what really grabs me is the trust’s assets.

At the end of December 2017, Intu boasted a net asset value per share of 411p. After Friday’s price fall, the shares are trading at less than half that, which is a big discount.

Barring a catastrophe around the corner, which I can’t see, Intu looks like a bargain to me.

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At the same time, we’ve seen a number of big-name retailers get into difficulty or close. This inevitably means that some landlords will face pressure to cut rents and agree shorter leases.

The two companies I’m looking at today sit on opposite sides of this divide. Both offer a mix of opportunity and risk, as I’ll explain.

Rising rents suggest sunny outlook

Shopping centre group Intu Properties (LSE: INTU) reported a solid first quarter today. The group’s focus is on prime shopping centres such as Trafford Centre in Manchester and Lakeside in Essex. Performance in these locations has remained strong so far.

Occupancy remained unchanged during the quarter, at 96.1%. The company agreed 43 new long-term leases in the UK and 17 in Spain during the period, for an average rent 5% above the previous figure. UK footfall is said to be up by 1.5% this year, excluding the snowy weather.

I can’t ignore this big discount

Large shopping centres aren’t sold very often, so it can be hard to estimate realistic market values. However, the firm sold a 50% stake in Intu Chapelfield for £148m during the first quarter, which it says was “in line with the December 2016 market value”.

That’s encouraging, considering that Intu shares currently trade at a 49% discount to their 2017 net asset value per share of 411p.

I’m tempted by this discount. But offsetting this is the group’s loan-to-value ratio of 45%, which is a little higher than I’d like to see. It’s also worth noting that the forecast yield of 6.8% seems likely to fall later this year, if a planned all-share takeover by retail rival Hammerson goes ahead.

Are the shares a buy? If the Hammerson deal can drive down debt by refinancing and selling some properties, then I believe Intu could be a profitable investment over the long term.

Backing a proven winner

Contrarian investors may be attracted to retail property. But I think there’s a real risk it’s still too soon to buy. In contrast, the risk with warehouse property is that it might be too late.

Tritax Big Box REIT (LSE: BBOX) is one of my favoured stocks in this sector. Its shares have been fairly flat over the last year, but the group’s rising dividend has provided an attractive income stream. The forecast yield for 2018 is 4.6%.

The risk is that at a price of 146p, Tritax shares already trade at a slight premium to their net asset value of 142.2p per share. Although I think the current price is justified based on the group’s recent performance, this premium means that further gains could depend on a rising property market or on debt-fuelled acquisitions.

Focus on quality

Tritax trades at a premium because investors are confident in the value of its property and the rents they generate. The group’s weighted average unexpired lease term is 13.9 years, providing good visibility of earnings.

There’s also a shortage of such properties on the market, so empty units aren’t difficult to rent.

Stable earnings and good forward visibility are a smart combination for dividend investors. I continue to rate this stock as a buy.

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Roland Head 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.

The main culprit for its share price decline in recent months is the increasing regulatory uncertainty surrounding the sector. It’s no secret that utilities are now on the back foot politically as nationalisation-supporting Jeremy Corbyn gains ground in the polls and consumer groups revolt over high energy prices, both of which have made the sector a political football that even the Tories aren’t keen to lend support to publicly.

An October report commissioned by the government proposed ending National Grid’s current role as the operator of the UK’s national electricity system, and would shorten the current eight-year rate review period to better match retail and wholesale energy costs. In addition to this, noisy consumer groups have targeted the profits energy distribution companies make, which has contributed to surging approval ratings for plans to renationalise utilities.

For now, these plans are unlikely to come to much as any hypothetical Labour government would still need to figure out a way to make shareholders whole without blowing a hole in the government’s balance sheet. Furthermore, regulator OFGEM is nominally politically independent, so a Labour government shouldn’t be able to demand drastic price caps to satisfy the public.

Where does this leave would-be shareholders eyeing up a potential bargain? Well, while I personally think the sell-off may have become overdone, the simple fact is that with all this regulatory uncertainty it’s fiendishly difficult to properly value a company such as National Grid. Although the business is still very profitable and richly rewards shareholders, the mere prospect of draconian government action creates too much confusion for me to be comfortable buying shares of National Grid right now.

Navigating choppy waters 

One of the few large caps out there offering a higher yield than National Grid’s is shopping centre operator Intu (LSE: INTU), whose shares yield 6.5%. This hearty dividend still looks quite safe as well, as annual results released on Thursday morning showed Intu making good progress against a challenging backdrop.

In recent years the company has whittled down its focus to a few core malls while selling off secondary ones as shifting consumer habits skew towards either low-end bargain shopping or splurging at high-end shopping centres. This focus is paying off for Intu as net like-for-like rental income rose a modest 0.5% last year while management reiterated its medium-term guidance for 2%-3% growth annually over the medium term.

However, this level of rental income growth represents a steep decline from previous years’, and footfall at the group’s centres rose a miserly 0.1% last year while retailers’ sales dipped negative at -2.1%, showing the pressures the sector faces.

In this environment it’s no surprise that Intu has decided to merge with larger operator Hammerson, so the two can further winnow down their portfolio to the best performers. With the share price of both groups down by around 20% over the past year, contrarian investors who believe in the sector’s future could find this combined mega-operator an intriguing high-yield option.

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Ian Pierce 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.

The £2.8bn property giant which owns many of the UK’s largest and most popular retail destinations, including Lakeside in Essex, Cribbs Causeway, and Manchester’s Arndale and Trafford Centre, has seen its share price in steady decline since early 2015, when it was trading as high as 376p. Today the shares can be picked up at a heavily discounted price of around 200p per share.

Protection from the taxman

For the past 10 years Intu has operated as a real estate investment trust (REIT) which means it enjoys a measure of protection from corporation tax in return for an obligation to distribute a significant amount of cash flows to shareholders.

As a REIT, Intu doesn’t pay UK direct taxes on the income and capital gains from its qualifying UK property rental business, with one requirement of this regime being that it must distribute at least 90% of taxable profits from the rental business to shareholders each year. That’s great news for dividend chasers.

The share price slump means that Intu is now trading on a much lower earnings multiple than in recent years at 15, and also supports a much higher dividend yield of 6.4%. If the shareholder payouts can be maintained, this alone should be enough to protect the share price from further falls.

Rising tide of pessimism

Still managing to hold on to its blue-chip status, but only just, is property peer Hammerson (LSE: HMSO). Like Intu, Hammerson has also had to deal with the rising tide of pessimism, with its shares falling to 525p, from highs of over 705p less than three years ago.

The London-headquartered property group also has a retail-focused portfolio that includes investments in 23 prime shopping centres in the UK, Ireland and France, as well as 17 retail parks in the UK, and 20 premium outlets across Europe. Despite the doom and gloom that surrounds the retail sector at the moment, our friends in the City still expect Hammerson to eke out annual mid-single-digit earnings growth in each of the next two years, which is certainly better than the company’s current share price would suggest.

Like Intu, Hammerson operates as a Real Estate Investment Trust (REIT) and distributes a generous chunk of its profits as dividends, which currently provide its shareholders with a solid yield of around 5%. Hammerson’s shares currently trade on a price-to-earnings multiple of 17, which although not cheap by conventional metrics, is much lower than its most recent five-year range of 20-25.

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Not as bad as we thought

Shares of shopping centre operator Intu Properties (LSE: INTU) have fallen by 20% so far this year. With consumer spending under pressure, perhaps that’s not surprising. But the stock gained 5% on Thursday morning, after the company’s latest trading update suggested the outlook might not be so bad after all.

Intu says that it expects to report a third consecutive year of like-for-like growth in net rental income. Rent reviews completed between 2 July and 2 November delivered an average increase of 15% on previous rents, while occupancy remains high, at 96%. Visitor numbers are said to be unchanged from last year.

What could go wrong?

In today’s update, Intu said that good progress is being made in re-letting former BHS stores to major retail chains. The group also said that none of its tenants went into administration during the period.

This is the key risk facing the firm, in my view. After all, long-term leases aren’t any help if the tenant simply can’t pay. And if that happens, Intu could end up with debt problems of its own.

Cheap enough to buy?

Trading conditions could get much worse for retailers. But this isn’t a certainty. Intu stock now trades 45% below its adjusted net asset value of 403p per share. In my view, this discount may be large enough to price in the risks facing the firm.

Investors who take the plunge should enjoy a 6.6% dividend yield this year, along with the potential for a significant re-rating of the shares in future years.

I’ve changed my mind

When I last looked at Royal Mail (LSE: RMG) in June, I was fairly bearish on the stock. But my view is starting to change. The postal operator’s share price has fallen by 15% since then, but trading has remained broadly in line with expectations.

The group’s trading update in July showed a 1% rise in group revenue, driven by a strong performance from Royal Mail’s parcel business, GLS, which includes Parcelforce. This was enough to offset a 1% fall in letter and parcel revenue through Royal Mail during the period.

Despite weak growth, cash flow remains strong and the group has very little debt. These factors make a surprise dividend cut fairly unlikely, as the firm would be able to use cash reserves or even borrowing to make up any temporary shortfall.

A potential bargain?

Full-year forecasts are for adjusted earnings of 39.4 per share this year. That puts the stock on a forecast P/E of 9.4. Dividend growth is expected to continue at about 4% per year, giving a forecast payout of 23.9p per share for the current year. That’s equivalent to a yield of 6.5% at the current price of 378p.

The risk of strike action over pension reforms remains a concern, but I’m starting to think Royal Mail’s share price sell-off may have gone too far. I’m considering this stock as a potential contrarian buy.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
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Roland Head 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.

Looking ahead, more volatility could be on the cards. While this may make the FTSE 100 appear to be a better buy than commercial property, due in part to its greater diversity, here are two dividend investment trusts which could outperform the wider index.

Impressive performance

Reporting on Thursday was the F&C UK Real Estate Investment Trust (LSE: FCRE). It has enjoyed a prosperous year, with the company’s share price total return being 26.8%. This takes its total return in the last five years to 123%, which is ahead of both its benchmark and the FTSE 100. In fact its benchmark, Property – Direct UK, is up 87%, while the FTSE 100 has recorded a total return of around 43% during the same time period.

Despite its strong performance, the trust trades a premium to its net asset value of 6%. This is not exceptionally high and indicates that it could still offer good value for money. Furthermore, the company has a dividend yield of 4.7%, with dividend cover increasing to 94.4% for the full year.

While the rise in level of shareholder payouts may be somewhat restricted if the UK economic outlook remains uncertain, the F&C UK Real Estate Investment Trust offers a yield which is likely to remain well ahead of inflation. Therefore, it could be a strong income choice for the long run.

High dividend potential

Also offering FTSE 100-beating potential in the long run is shopping centre operator Intu Properties (LSE: INTU). It offers a dividend yield of 6.1%, which is more than twice the current rate of inflation. This could cause investor demand for its shares to rise if inflation moves higher, which may help them to reverse their decline of 20% over the last year.

Intu’s falling share price may be linked to uncertainty surrounding the UK economic outlook. Higher inflation has generally caused a squeeze on consumer spending in the past, and since it is higher than wage growth it could do the same in future. This means that rents may not rise as quickly as the company had previously hoped, while demand for retail space may also come under a degree of pressure.

Although Intu also has operations in Spain, the UK remains its main focus. This means that short-term volatility could be present for the business. However, with it having a price-to-book (P/B) ratio of just 0.6, it seems to offer a wide margin of safety. This could help protect its investors from further challenges in the months ahead, and may create significant upside potential which allows for outperformance of the wider index in the long run.

The post 2 dividend investment trusts that could beat the FTSE 100 appeared first on The Twelfth Magpie.

More reading

• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

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.