Then you’ll face the toe-curlingly large costs that come with purchasing a property. And don’t even get me started on the risks and uncertainties that you’ll face once you are up and running.

But the biggest problem of all is that you’ll be massively overweight in just one investment. Unless, of course, you have millions to start with and can diversify across many properties. But the reality is probably that you don’t have enough money and that’s why you’re investing in the first place.

A solution to the diversity problem

However, there’s a neat solution to the diversification problem in the many property-backed shares available on the London stock exchange. By buying shares of property companies instead of buy-to-let, you can outsource the property management part of the equation (and all the hassle) to the directors of the underlying company behind a share. Also, because the underlying property businesses are well funded, they can invest in several properties, which means that your shares in the company are backed by a diversified portfolio, which is very hard to achieve with buy-to-let.

One interesting stock market-listed company reported its full-year results today is MedicX Fund (LSE: MXF), which owns 165 purpose-built primary healthcare properties across the UK and Ireland, and the annual figures are good. Adjusted earnings per share rose 11.4% year-on-year and the net asset value increased by almost 7% to 81.8p, which compares well with the current share price around 76p, suggesting decent value. Over the year, the amount of rent received went up 8.6% and the firm said in the report that just over 89% of the rent roll is paid directly by the National Health Service (NHS), Irish General practitioners (GPs) or the Health and Safety Executive (HSE), which implies that the rent is reliable and enduring.

Defensive qualities

The property portfolio was revalued nearly 19% higher during the period at almost £807m, and the net yield is running at almost 5%, which I reckon compares well to buy-to-let these days. Looking forward, the directors said in the report the firm has a “strong” pipeline of around £144m worth of acquisition opportunities, including projects with a value of £69m in “solicitors’ hands.^”  

The directors argue in the report that MedicX has defensive qualities and is unlikely to be affected by Brexit. The firm, they said, invests in a sector with “ever-increasing demand driven by growing, ageing populations.”  None of that will change whatever our future relationship looks like with the European Union. I think the argument is persuasive and that’s why MedicX would sit well in a portfolio with other property-backed investments on the stock market.

The forward dividend yield runs close to 5%, which looks attractive, and I think the share is well worth your consideration, particularly if you are interested in investing in the property sector.

The post Why I’d diversify into this property-backed share before committing to buy-to-let appeared first on The Twelfth Magpie.

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Kevin Godbold 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.

Earnings per share have pretty much remained flat in recent years, from 31.9p in 2013 to a barely unmoved 30.4p for the year ended April 2017. We have 28p-29p pencilled-in for the next couple of years, putting the 331p shares on P/E multiples of 11 to 12.

First-quarter results released Tuesday paint a familiar picture. At £2,532m, total revenue for the period showed a 2.7% rise, with UK revenue of £2,259m up 2.6%. Food revenue rose by 4.5%, but Clothing & Home is still struggling to turn itself around with a 0.5% drop — and  total like-for-like UK revenue slipped by 0.5%, with Clothing & Home down 1.2%.

Improving margins?

On the up side, Clothing & Home full-price sales were up around 7% (and no clearance sale, as there was a year ago), so those broadly flat sales might even convert to an improvement in profit.

M&S has been opening more Simply Food outlets too, and concentrating on what you do best is a good strategy in my book.

That brings me to my alternative view of the company. If, instead of looking for a recovery stock and expecting a turnaround to steady earnings growth, I consider M&S as a plodding but stable payer of dividends, I see it in a different light.

Dividends have grown a little, from 17p in 2013 to 18.7p, and there are slight rises forecast between now and 2019. With the share price having fallen over the past couple of years, we’re looking at yields of around 5.6%. That looks good to me.

Steady cash

Although I generally don’t like investing in managed funds, buying shares of the companies running them can be very profitable — and I’m a big fan of investment trusts, which have a number of advantages. One is the flexibility they enjoy over handing out cash to shareholders, enabling them to maintain a reliable long-term dividend plan.

That’s precisely what MedicX Fund (LSE: MXF), set to soon convert to a real estate investment trust, has been doing. The company invests in purpose-built primary healthcare properties, mostly GP practices and pharmacies — and that provides steady NHS-guaranteed rental income, often with inflation-linked rises.

The first half of the current year saw a 5.1% rise in rent receivable, which is well ahead of inflation, and that should help the firm to an anticipated full-year dividend of 6p per share under its progressive dividend policy.

On today’s share price of 89.5p, that would amount to a very nice yield of 6.7%.

Sufficient cover?

The only apparent downside is an underlying dividend cover of only 70%, but there are a couple of things that should offset that worry. Firstly, MedicX offers a scrip dividend scheme, and the cash doesn’t need to be found for those taking their dividends as shares (which is surely the best thing to do for long-term gain).

The company says it is “committed to increasing dividend cover over time“, and points out that cover at any one time depends on “the balance between debt and equity capital and the number of assets under construction“. A planned debt drawdown to fund some Irish developments should increase cover too.

I see MedicX’s dividends as reliable, and I think the shares are attractively priced.

The post 2 super dividend yields that could make you stinking rich 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.