In contrast, FTSE 250-listed Saga (LSE: SAGA) offers a dividend yield of over 8%. This suggests it could generate high returns, with a margin of safety appearing to be on offer. After a disappointing share price performance, the travel and finance company targeting the over-50s could deliver a sound recovery, alongside a smaller dividend stock which released some positive news on Monday.

Improving performance

The company in question is Real Estate Investors (LSE: RLE). The Birmingham-focused real estate investment trust (REIT) is seeing an increase in tenant demand across its portfolio. Its number of tenants increased by 4.3% to 269 in 2018, while its occupancy level of 96.1% is 2.2 percentage points higher than in the previous year, representing a record level for the company.

The business intends to continue to focus on existing opportunities within its portfolio. It recently acquired a mixed-use scheme called The Quadrant in Redditch for £3m, which represents a net initial yield of 12.2%. Although it’s aware of potential economic challenges, it continues to seek expansion opportunities.

With a dividend yield of 7.7%, Real Estate investors could have income investing potential. Clearly, it’s a relatively small business which operates in a narrow geographical area. However, with a price-to-book (P/B) ratio of 0.8, it could offer a wide margin of safety.

Recovery potential

Also trading at a relatively low valuation is Saga. As mentioned, it’s experienced a disappointing share price performance in recent months, following the FTSE 250 lower while being hurt by difficult operating conditions. They have caused its financial outlook to remain somewhat challenged, with profit growth expected to be minimal over the next couple of years.

From an income investing perspective, though, the stock could have significant appeal. Its dividend yield stands at 8.6%, which is 3.7 times the current rate of inflation. Dividend payouts are expected to be covered 1.5 times by profit in the current year, which suggests that they are affordable and could even rise over the medium term.

In terms of Saga’s valuation, its price-to-earnings (P/E) ratio of 7.9 suggests that it offers a margin of safety. Its bottom line is forecast to return to growth in the next financial year, while a refocused strategy could help to enhance its financial returns. At a time when a number of FTSE 350 shares yield over 5%, the stock could offer a mix of dividend appeal, value-investing potential and recovery prospects over the long run.

The post Forget a cash ISA! I’d pick up an 8% dividend yield from FTSE 250-member Saga appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Saga. 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.

Of course, some of the FTSE 100’s incumbents offer higher yields than the index. National Grid (LSE: NG), for example, has a dividend yield of 6%. This could mean that it’s able to offer stronger total returns than the index over the long run. Alongside a 6.6%-yielding stock that reported positive news on Monday, it could be worth buying for investors who are looking to generate high income returns.

Improving prospects

That company in question is Real Estate Investors (LSE: RLE). The Midlands-focused property group released first half results which suggest it continues to benefit from strong operating conditions. Its revenue increased by 4.2% to £7.4m, while underlying profit before tax moved 9.7% higher to £3.4m. Its gross property assets increased by 2.2% to £217.8m, while acquisitions of £7.6m were undertaken during the period. They have the potential to boost its financial performance yet further, having been purchased at a net initial yield of 7.66%.

Although the company has experienced positive trading conditions during the period, it’s nevertheless planning for a challenging year. Given the increasing political uncertainty in the UK, this seems to be a shrewd move. As such, strategic sales, securing £30m of cash and agreed bank facilities, could help the business to capitalise on any downturn in the property market. With Real Estate Investors having a dividend yield of 6.6% at the present time, its total return potential seems to be high over the long term.

Solid performance

The income prospects of National Grid also seem to be relatively impressive. The company is aiming to raise dividends per share by at least as much as inflation over the medium term. Given the potential for the pound to weaken in the coming months as Brexit becomes a reality, this could be a policy from which investors benefit over the medium term. And with dividends being covered 1.2 times, they seem to be highly affordable.

Of course, the company faces regulatory and political risk. As with a number of utility stocks, the threat of more onerous regulations and nationalisation looks set to remain a feature of their outlooks over the next few years. But with such a high yield and a price-to-earnings (P/E) ratio of around 15, it seems as though investors have priced in the risks facing the business.

As such, from a risk/reward perspective, National Grid appears to be worth buying for the long term. The FTSE 100 may offer a relatively high dividend yield, but with the utility company’s income return being 200 basis points higher, it could deliver stronger returns in the long term.

The post Forget the FTSE 100, National Grid’s 6% yield may be all you need appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of National Grid. 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.

However, today may eventually be viewed as a stunning opportunity to buy property stocks for future years. Valuations are low, financial performance remains robust and this could mean the risk/reward ratios on offer are compelling. With that in mind, here are two property stocks that could be worth buying right now.

Improving performance

Reporting on Tuesday was Real Estate Investors (LSE: RLE). It is a real estate investment trust (REIT) which is focused on the West Midlands commercial property market. Its pre-tax profit for the 2017 financial year increased by 37.8%, with a record underlying profit before tax of £6.2m. Its property assets grew in value to £213.1m, which is a gain of 5.5%. This has allowed the company to increase dividends for the fifth year in a row, with them up by 19% during the year.

Looking ahead, the uncertainty present in the property market provides the company with the opportunity to buy discounted assets. It has also been able to make strategic sales and remains confident in its long-term outlook.

With Real Estate Investors trading on a price-to-book (P/B) ratio of 0.7, it seems to offer excellent value for money. While relatively small and lacking in regional diversification, the stock has a wide margin of safety. This suggests that even if the wider economy experiences a downturn, its valuation may have already factored-in more difficult trading conditions. As such, it could be worth buying at the present time.

Solid performance

Also offering investment potential within the REIT sector is Land Securities (LSE: LAND). As one of the largest operators in the sector, it offers a considerable degree of diversity and a strong balance sheet. This could help it to perform relatively well in what may prove to be a challenging era for the economy.

In previous years, the company has been able to generate solid performance. Its earnings have risen in each of the last four years and are due to do likewise in the next two. This could help to boost the company’s income prospects, with it expected to yield almost 5% in the next financial year.

With an envious portfolio of assets and a strategy which seems to be working well, Land Securities could prove to be a strong buy for the long term. As with many of its sector peers, it could offer a volatile share price in the short run. But with a P/B ratio of just 0.6, it appears to be in ‘bargain territory’ and could be worth buying now for the long run.

The post Looking to invest £1,000? Here are two cheap investment trusts I’d consider appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Land Securities Group. The Motley Fool UK has recommended Land Securities Group. 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, with inflation already standing at 3% and forecast to move higher, a 4% dividend yield may not remain a real-terms income return in the medium term. Therefore, buying these two investment trusts with higher dividend yields than the FTSE 100 could be a shrewd move.

Positive outlook

Reporting on Monday was Midlands-focused property Group Real Estate investors (LSE: RLE). The REIT announced the sale of 24 Bennetts Hill in Birmingham for a cash consideration of £4m. This is a premium to book value and represents a 5.9% net initial yield. It also means the business has almost doubled its money versus the £2.06m it paid for it in December 2014.

In addition, Real Estate Investors has also completed the letting of Peat House in Leicester. The building is fully occupied and produces a rental income in excess of £0.5m per year. This has contributed to a record occupancy across the company’s portfolio of 95%, which suggests that it could enjoy continued strong momentum in future.

With a dividend yield of 5.1%, the company looks set to offer a real income return in the long run. Furthermore, its bottom line is expected to increase by 14% next year and this is due to prompt a rise in dividends of around 7%. This means that not only does it have an above-inflation dividend yield, its shareholder payouts could rise at a much higher rate than inflation in future years. As such, now could be the perfect time to buy a slice of the business.

Upbeat outlook

Also offering an impressive outlook is fellow REIT Hansteen (LSE: HSTN). The company’s asset base appears to be strong after several changes have been made, with its profitability due to rise by around 20% next year. This suggests that the performance of its end markets could continue to be strong, albeit with some uncertainty being present.

A double-digit rise in earnings is expected to prompt a rise in dividends of 6.3% in the 2018 financial year. This puts the company on a forward dividend yield of 4.7%. Beyond next year, there could be scope for a further rise, as the company appears to have a sound strategy which is benefitting from continued strong demand for rental space.

As well as this, Hansteen could deliver a rising share price. Its dividend yield suggests that it may offer good value for money, while a price-to-earnings growth (PEG) ratio of just 0.9 may do likewise. Therefore, although the UK economy may face an uncertain future due in part to Brexit and the potential challenges it may bring, now could be the right time to buy a REIT such as Hansteen for the long term.

The post 2 dividend investment trusts with higher dividend yields than the Footsie appeared first on The Twelfth Magpie.

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Peter Stephens owns shares in Hansteen. The Motley Fool UK has recommended Hansteen Holdings. 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.

Finding sources of high dividends is becoming increasingly challenging. With inflation edging higher, demand for companies that offer real income returns is increasing. This could push their share prices higher, while at the same time make it even more difficult to beat inflation.

While an interest rate rise may be on the cards in the near term, it may be insufficient to significantly reduce the rate of inflation over the medium term. With that in mind, these two investment trusts could be worth buying right now.

Improving performance

Reporting on Monday was real estate investment trust (REIT), Real Estate Investors (LSE: RLE). The company is focused on commercial property in Birmingham, and it has enjoyed strong performance in the first half of its financial year. For example, its net asset value (NAV) per share increased by 2.1% and its revenue increased by 19.9%. This was despite continued market and political uncertainty, with the company’s robust strategy and resilient investment market helping it to perform relatively well.

Real Estate Investors was able to increase dividends per share by 20% in the first half of the year. This puts it on a dividend yield of 5.1%, which is 2.2% higher than the current rate of inflation. The prospects for dividend growth appear to be encouraging. A rising dividend remains a central part of the company’s strategy following five years of year-on-year growth. And with the West Midlands economy remaining vibrant and benefitting from weaker sterling, the performance of the business could remain strong.

Certainly, there are clear risks to the wider UK economy from Brexit. Uncertainty could cause reduced spending by businesses and consumers alike. However, with a price-to-book (P/B) ratio of just 0.9, the company appears to offer a wide margin of safety for the long term.

Income potential

Also offering strong income prospects is The City of London Investment Trust (LSE: CTY). It has a dividend yield of 4.1% at the present time and a number of its major holdings have significant dividend growth potential over the medium term. For example, Lloyds is due to increase its payout ratio in the next couple of years, while Shell‘s free cash flow is expected to increase due in part to its acquisition of BG.

As well as dividend growth potential, the company has a diverse range of holdings which should minimise risk. For example, over 11% of its holdings are in non-UK equities. This could provide some geographical diversification, while an overall focus on the UK may allow it to continue to benefit from weaker sterling to at least some extent in future.

While it trades at a premium of 1% to its NAV, The City of London Investment Trust has a strong track record of growth. It has recorded a return of 24.6% over the last three years, which is almost 2% higher than its UK Equity Income benchmark. As such, it appears to be a shrewd buy for the long run.

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Peter Stephens owns shares of Lloyds and Shell. The Motley Fool UK has recommended Lloyds Banking Group and Royal Dutch Shell B. 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.

Strong performance

Reporting on Wednesday was shopping centre operator Intu (LSE: INTU). The company stated that the active tenant demand of last year has continued into the current year. Since the start of the year it has been able to sign 42 long-term leases representing £6m of annual rent. This is 5% above the previous passing rent.

The company has also made progress with its development pipeline, with 90% of the space in the Intu Lakeside extension either exchanged or in solicitors’ hands. Although the company acknowledges that the outlook is challenging due to Brexit, it nevertheless is focused on delivering continued growth in like-for-like net rental income. Alongside its operations in Spain, it appears to have a bright long-term future.

With Intu currently yielding 5%, it seems to be a relatively attractive income stock. While dividends are covered only 1.1 times by profit, the nature of the company’s business means it can afford to pay out almost all of its earnings to shareholders in the form of a dividend.

The company’s price-to-book (P/B) ratio of 0.75 suggests that it offers a wide margin of safety. This means that even with the uncertainty caused by Brexit, its shares could offer significant upside potential. As such, their risk/reward ratio seems to be highly attractive.

High reward potential

While Intu has Spanish operations and locations which are well-diversified across the UK, Real Estate Investors (LSE: RLE) offers a much more localised business model. It is focused on Birmingham and the West Midlands, which means it is likely to have a higher risk profile than its property sector peer.

Despite this, Real Estate Investors could prove to be a sound long-term buy. It currently offers a dividend yield of 4.9%, which could rise in future. The reason for this is an excellent track record of growth in the level of shareholder payouts. In 2012, the company paid a dividend of just 0.5p per share, while that has now risen to 3p per share in the current year.

While a six-fold rise may not be achievable in future due to a dividend coverage ratio of 1.2, investors in the company look set to experience an inflation-beating increase in future dividends.

As well as generous income returns, Real Estate Investors also has capital growth potential. Its shares trade on a P/B ratio of only 0.9, which indicates that they offer a wide margin of safety. With earnings growth of 22% forecast for 2017, now could be the perfect time to buy a slice of the business.

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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.

Also, if you’re prepared to be greedy when others are fearful, you can buy REIT units at a significant discount to the value of the underlying property, which is probably one of the greatest advantages of investing in property via a REIT. 

Two of the property companies I’ve selected for my portfolio are U and I Group (LSE: UAI) and Real Estate Investors (LSE: RLE). 

Property development income 

U and I Group is a property regeneration company, which means it’s more speculative than a REIT but the returns on offer are higher. The company is primarily a property developer that buys, develops and sells on buildings generating an impressive return for investors along the way. Management is targeting £50m in property development gains per annum until 2019, with a 12% annual post-tax return for investors targeted through a combination of net asset value growth and dividends. 

In addition to the firm’s property development arm, management has acquired a number of properties to lease providing a steady rental income for the group. 

At the end of August U and I’s net asset value per share was calculated at 272p meaning that at today’s price of 160p, the shares are trading at a 42% discount to NAV. City analysts are forecasting a dividend yield of 4.8% this year and 7.7% for 2017 as the company pays out development profits. In the past 30 days, management has acquired around 40,000 shares in the company to take advantage of the depressed share price. 

Commercial REIT

Real Estate Investors is a commercial property REIT focused on the North of England. The company’s CEO owns a significant chunk of the group’s outstanding shares, and so you can be sure he’s looking to achieve the best returns for investors. 

Over the past few years, Real Estate has been expanding its property portfolio, buying assets with high-quality existing tenants in place that offer a double-digit yield. For the first half, the company reported a 58% increase in gross property rental income, 24% increase in gross property assets and management hiked the first quarter dividend distribution by 25%. 

At the end of June, the group’s NAV was 63p. Once again, just like U and I, shares in Real Estate are trading at a double-digit discount to net asset value after recent declines. Also, Real Estate’s management has been increasing their shareholdings in the company recently. A dividend of 2.5p per share is predicted for 2016, a yield of 4.4% at current prices. 

Foolish summary 

All in all then, I believe that Real Estate and U and I are some of the best stocks to play the UK property market. Both companies are trading at a deep discount to net asset values, support an above average dividend yield and management owns a large chunk of the shares. 

The post Why I own these two under the radar property stocks appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns shares in U and I Group and Real Estate Investors. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.