A single aim 

Secure Income REIT (LSE: SIR) was founded with the sole objective of generating a steady double-digit annual return for investors from property. 

The focus of the company is finding properties with tenants on ultra-long-term leases. The weighted average unexpired lease term in its portfolio is 22 years, with no break clauses. What’s more, over half of the leases in place with tenants have fixed annual rent uplifts of at least 2.8% per annum, with the rest linked to inflation.

Management has set out to create one of the best property businesses around and they are said to benefit more than most because they own more than 16% of the company. In other words, if they fail, they stand to lose a lot of money.

Rising yield 

Management skin in the game, coupled with Secure Income’s robust property portfolio, are the primary reasons why I believe this real estate investment trust is a great alternative to buy-to-let property. 

At the time of writing, the shares are trading just under net asset value per share of 382p, and support a dividend yield of 3%. This distribution is slightly lower than I’d like, but over the next two years, analysts think the payout will increase by 60%, giving a prospective dividend yield of 4.4%. And the prospects for dividend growth in the years after is also bright, with property lease income linked to inflation.

Defensive income 

Along with Secure Income, I’m also attracted to the defensive qualities of Target Healthcare (LSE: THRL). 

Much like Secure Income, Target is focused on inking long-term lease deals that guarantee income for extended periods. The trust’s speciality is purpose-built UK care homes. As there seems to be a constant stream of care home providers going out of business, this sector doesn’t have the best reputation for investor returns. However, the lack of social care facilities is one of the most significant problems facing the UK right now, and the government is currently working on many solutions to the problem. Whichever solution policymakers decide on, I reckon it’s highly likely the industry will see a boost in funding in the near term, which should improve its overall financial health.

Target only invests in modern care home facilities with multi-decade leases which, in my opinion, makes the company one of the most attractive investments in a troubled sector. With a dividend yield of 6% at the time of writing, it’s also highly attractive from an income perspective. 

A net asset value of 106p at 30 September puts the 108p shares on a slight premium although, as my colleague Alan Oscroft has pointed out, this premium suggests investors believe that the market-beating dividend yield is here to stay.

The post Forget buy-to-let. I think these stocks are a better buy appeared first on The Twelfth Magpie.

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Looking further ahead, though, the company could generate high returns due to government policy, as well as the nature of the UK housing market. Alongside an income stock that reported positive news on Friday, now could be the perfect time to buy Taylor Wimpey for the long run.

Impressive outlook

The company reporting on Friday was real estate investment trust Secure Income REIT (LSE: SIR). It released interim results which highlighted its resilient dividend potential. Its like-for-like portfolio valuation increased by 2.8% over the six-month period, while it was able to reduce its net loan to value to 44.4%. This is down from 29.6% at the end of 2017 and may provide the company with a more robust balance sheet over the medium term.

During the period, the company was able to complete the £436m acquisition of two off-market properties. They provide an initial property yield of 5.2% secured on assets in defensive sectors let to good covenants with inflation or fixed uplifts. As such, they may catalyse the company’s financial performance.

With Secure Income REIT having a dividend yield of 3.9%, it seems to offer an impressive income return. The stock also appears to have an attractive valuation and could therefore deliver high total returns in a stable fashion over the long run.

Growth potential

The outlook for the Taylor Wimpey share price over the long run may also be impressive. The company has been able to build a significant economic moat in recent years. It now has a large landbank as well as a substantial net cash position. Both of these factors could mean that the company enjoys barriers to entry, as well as the capacity to withstand slower-growth periods for the UK housing market.

Although in the short run there could be pressure on house prices, demand for new-build homes is set to remain high. First-time buyers require only a 5% deposit as a result of the Help to Buy scheme, while low interest rates make housing even more affordable.

Due to this, the financial outlook for Taylor Wimpey seems to be upbeat. The company is forecast to post a rise in earnings of 4% in each of the next two financial years. With a price-to-earnings (P/E) ratio of 9 and a dividend yield that is expected to reach over 10% next year, the total return potential of the stock seems to be impressive. It could prove to be one of the best buys in the FTSE 100 at the present time.

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Peter Stephens owns shares of Taylor Wimpey. 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.

Indeed, I believe one of the most attractive qualities about Lok is its dividend growth record. Over the past six years, the payout to investors has risen by 100% or around 15% per annum and City analysts have pencilled in annual double-digit growth for the next two years. 

This rate makes the company, in my opinion, a fantastic income play. And I believe dividend growth could surpass City forecasts in the years ahead as Lok ramps up its store expansion policy.

Investing in growth

Today it reported the acquisition of two further freehold sites to add to its development pipeline, one in Cardiff and one located in Cheshunt, Hertfordshire. Both of the sites are located in what the company describes as “busy” locations.

With the addition of these stores, Lok has a development pipeline of nine landmark stores. According to management, this “pipeline adds 39% to owned freehold trading space and 54% to the managed store portfolio, delivering a total of 32% increase to overall trading space.”

Looking at this pipeline for growth, it is no surprise that the analysts expect the company’s earnings per share to increase by around 30% over the next two years.

Another attractive quality of the business is the fact that its CEO, Andrew Jacobs owns almost 19% of the company. I am big fans of companies where management holds a significant stake because it means they are highly incentivised to produce the best returns for investors, and not put the enterprise in a position that may jeopardise their wealth and reputation.

In this case, it seems Jacobs is also as much of a fan of dividends as I am, which is great news for income investors. In the announcement revealing today’s deals, he declared “we are producing predictable growth in dividends for investors from…an increasing asset base and strong balance sheet.”

This commitment to dividends helps Lok stand out as one of the market’s top dividend stocks. I also believe it more than makes up for the below-average dividend yield of 2.6% offered by the shares. 

Secure income 

If Lok isn’t your cup of tea, then perhaps Secure Income REIT (LSE: SIR) might be a better buy.

Secure Income was founded by property entrepreneur Nick Leslau, who remains one of the company’s largest shareholders. In total, management owns 16.4% of the business, a stake worth £140m at the end of December 2017. 

The real estate investment trust was founded with the goal of providing a secure, steady income for investors backed by property. And looking at the company’s current property portfolio, there’s no reason to believe that it cannot accomplish this goal. The group has protected itself from the risk of vacancy by sticking only to long-term lets with strong covenants. The weighted average unexpired lease term is 22.2 years, and there are no break options, which should enable it to sail through any property market storms.

At the same time, 58% of the company’s contracts with lessees have fixed annual uplifts in rent of at least 2.8% per annum. The remainder of the portfolio is on RPI-linked agreements with annual and five-yearly rental revisions.

Put simply, Secure Income has constructed one of the most defensive property portfolios around, and you can take advantage of this today.

Living up to expectations 

Shares in Secure Income also look to be much more appropriately valued than those of Lok. The dividend yield is a respectable 4%, and management is always on the lookout for new assets to buy, which will increase the group’s net asset value. 

Last year it registered net asset value growth of 14.5% which, together with dividends paid, equated to a total shareholder return of 19%. Secure Income certainly looks to be living up to its name.

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Rupert Hargreaves owns no share 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.

With UK interest rates currently well below the inflation rate, cash is a big loser. Thankfully though, there are some investments that could actually benefit from higher inflation, and today I’m going to take a closer look at two of them.

Property

Property investments are a natural hedge against inflation, since landlords have the ability to periodically review rents to reflect unexpected bouts of inflation, among other market factors. And as property represents a ‘real’ asset, property values have held up well against inflation over the very long term.

Landlords can also get added protection through the linking of rent increases to the rate of RPI-inflation. Secure Income REIT (LSE: SIR) is one such commercial property landlord which has taken advantage of these RPI-linked leases.

The REIT has much greater income predictability than most property portfolios, given that 86% of its rental income comes from leases which benefit RPI protection, while a further 13% have fixed uplifts.

Vacancy risk

It has also protected itself from the risk of vacancy by sticking only to long-term lets with strong covenants. With a weighted average unexpired lease term of 22.2 years, and no break options, it has one of the longest average unexpired lease lengths in the REIT sector. This means its rental income should hold up well even during if economic conditions turn sour.

One downside, however, is its high level of tenant concentration, which could increase the risks resulting from a potential default by a single large tenant.

Based on its Friday’s share price of 373p, the REIT currently offers a yield of 3.7% and trades at a 1% premium to its NAV.

Renewable energy

Infrastructure investments are another way to beat inflation, and in this sector, I’m keen on the Bluefield Solar Income Fund (LSE: BSIF). It is one of the biggest solar investment trusts in the UK, with a total net asset value of roughly £400m.

It has a great deal of protection against rising inflation, since it earns government subsidies, via Feed-in tariff and CfD subsidies, that are directly linked to the rate of inflation. In fact, management is so confident that rising inflation would benefit its earnings potential that it has in place a dividend policy which is linked to the rate of RPI inflation.

Reflecting the accelerating pace of inflation, its dividend growth has also accelerated. For its 2017 financial year, the company paid a total dividend of 7.43p per share, reflecting the RPI increase of 3.5% in July 2017.

The company also has some protection against rising interest rates since a majority of its debt is secured on fixed interest rate terms. This would mean that should the Bank of England attempt to combat higher inflation by raising interest rates, its average cost of debt would not rise by much — limiting the impact of a potential drag on its earnings.

Shares in the fund currently offer investors a yield of 6.6%.

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Jack Tang 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.

As well as this guaranteed income stream, the company has increased its net asset value by over 100% since its IPO in June 2014 by reinvesting earnings and borrowing additional funds to invest. 

Unfortunately, the one downside of this strategy is that Secure Income’s net loan-to-value ratio was 51% at the end of June. Although considering the stability of the group’s earnings stream, as well as the fact that interest repayments are covered twice by rental income, I do not believe that investors should be concerned about this high level of leverage.

Slow and steady wins the race

Secure Income has a record of generating steady returns for investors, and it looks as if this is set to continue with the company’s tenants in place for the next two decades. At the time of writing the shares support a dividend yield of 4.1% and the net asset value per share at the end of June was 355p, so the stock is trading at a modest price of just one times book value.

Overall, if you are looking to invest your first £1,000 in a reliable, defensive, income-paying stock, Secure Income should not be overlooked.

Undervalued property 

Another real estate investment trust that could be a great starter income investment for your portfolio is Green REIT (LSE: GRN).

Like Secure Income, this Ireland-based investment trust has a record of generating value for shareholders. Over the past four years, book value per share has increased by around 50%, and since its IPO at the beginning of 2013, the stock has returned 37% for investors, excluding dividends. At the time of writing the shares support a dividend yield of 3.9%.

According to Green REIT’s figures for the six months to the end of December, which were published this morning, the company produced a total return of 13.6% for investors, following a return of 13.5% for 2016. Unlike Secure Income, the firm has been able to accomplish this growth with a relatively low level of debt. Its loan-to-value ratio was just 22.1% at the end of December with an all-in cost of debt of 1.8%. 

At the end of the period, Green REIT’s net asset value per share was €1.68, indicating that at the time of writing the shares are trading at a 7.7% discount to the value of the underlying property. With this being the case, this stock could be a better buy for income investors seeking to gain exposure to a secure income stream from property at a discounted valuation. The one downside is that this REIT’s dividend yield is below 4%, although the unleveraged balance sheet (leaving plenty of room for further asset growth) and discounted valuation more than make up for this lack of income in my opinion.

The post 2 ‘safe’ dividend stocks I’d buy with £2,000 today appeared first on The Twelfth Magpie.

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The UK property market is going through uncertain times. From Brexit to slowing growth, there are mounting concerns that the property market is cooling off after many years of growth. British Land and Land Securities, two large listed real estate investment trusts (REITs) which are seen as bellwethers for the market, have reported declines in their portfolio valuations and rising vacancy rates for the first time in many years.

But for long-term investors, there could also a buying opportunity on offer. Not all REITs are reporting falling valuations, with many still continuing to report positive valuations gains and rising rents.

Defensive portfolio

Secure Income REIT (LSE: SIR) is one such sector operator. Over the first six months of the year, the trust’s net asset value (NAV) per share gained 9.9% to 355.5p, as its portfolio valuation rose by 4.8% to £1.72bn since 31 December 2016. Rents increased 2.7% over six months to 30 June, while the vacancy rate remained at 0%.

These results show that although there are parts of the UK property market beginning to slow, there’s growing divergence between different property sectors. Unlike the bellwether REITs, which are mainly invested in retail and office space, Secure Income instead focuses on healthcare, leisure and hotel assets.

And as the group has a weighted average unexpired lease term of 22.7 years with no break options, Secure Income’s portfolio is also more defensive than a typical REIT. As such, I expect its portfolio to hold up well amid uncertainty in the broader market.

Looking ahead, City analysts expect dividends this year will rise to 13.9p per share, giving investors a prospective yield of 3.9%. And although the REIT currently trades at a 1% premium to its NAV, I believe this reflects the high level of investor demand for safe income-generating assets.

Irish property

Another REIT showing resilient growth is Irish property investment company Green REIT (LSE: GRN). The group owns and manages a €1.38bn commercial property portfolio centred primarily around Dublin.

Tenant demand and occupancy rates for Dublin office space have held up well in comparison to London, thanks to favourable fundamentals. The Irish market is set to benefit from a rise in take-up of new office space over the next few years, as financial institutions look to set up offices in other EU member states, post Brexit.

For the year to 30 June, Green REIT’s NAV per share rose 9% to €1.66, following revaluation gains of €97m over the past year. Prime headline rents in Dublin city centre have remained static in the last 6 months, but its vacancy rate fell slightly to 1.5%. What’s more, its balance sheet remains strong, with a loan-to-value ratio of 20.2%.

Based on today’s stock price, the proposed 5 cent per share dividend payout works out as an uninspiring yield of around 3.3%. However, valuations are more tempting, with Green REIT now trading at 9% discount to its NAV.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca. 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.

Real estate investment trusts are the perfect dividend stocks. Their dividends are paid out from property income, which is stable and recurring. What’s more, investors can benefit from a rise in the value of the underlying property. 

Building up the portfolio 

LXI Reit (LSE: LXI) is a relatively new trust, and as a result, flies under the radar of most investors. The firm only went public at the end of February and since its IPO, management has been building up the portfolio with funds received from the listing as well as a £55m loan facility. 

Today it announced that it has finished its investment programme, having spent the majority of its funds on a high-quality commercial property portfolio. Across the company’s assets, the average net initial yield is 5.94%, and the weighted average unexpired lease term to first break is 24 years, giving a steady income stream for the next two-and-a-half decades. The income is secured against 17 strong tenants, including the likes of Aldi, Costa Coffee and General Electric while 96% of the leases have index-linked rent uplifts. 

LXI was founded with the goal of producing a steady, secure, inflation-linked income to investors, and it looks as if its property portfolio will help the company meet this goal. Management is targeting a minimum annual dividend of 5p per ordinary share, starting from the financial period commencing 1 April 2018. 

Based on today’s stock price, the expected 5p per share payout works out as a yield of around 4.9%. As well as the 5p per share dividend target, LXI is planning to produce an 8% per annum return for investors over the medium term. This goal will be achieved with the 4.9% dividend yield and yearly valuation uplifts of the property portfolio. 

Unfortunately, as the company has only just completed its property acquisitions, there’s no detail as of yet on the net asset value per share — the metric that’s generally used to value REITs — although the targeted 8% per annum return makes the LXI look highly attractive for buy-and-hold investors. 

Defensive income

Secure Income REIT (LSE: SIR) is one of my favourite REITs because the company has a record of producing returns for investors and has a defensive property portfolio. Indeed, the company’s property portfolio contains 20 freehold private hospitals, giving it an extremely stable income stream from defensive assets. Overall, the group owns a portfolio of 81 real estate assets with a weighted average unexpired lease term of over 23 years and a net initial yield of 5.3%. 

Since 2007, according to the company’s figures, the return on its assets (both income and capital growth) has averaged between 9.5% and 8.5% per annum since inception. And since the REIT’s IPO in June 2014, it has produced a total return for investors of 61%, a compound annual return of 17.2%. 

City analysts expect Secure to pay a dividend of 13.9p per share to investors this year, giving a dividend yield of around 4%. The last reported net asset value per share was 324p, so at the time of writing, shares in Secure trade at a premium of approximately 8% to the underlying asset value. 

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Rupert Hargreaves owns no stock 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.

Real estate investment trusts offer the perfect alternative. Designed as a tax efficient way for investors to gain access to property without having to buy the properties themselves, REITs are a great asset to diversify your portfolio, and their returns are almost as stable as a physical property investment.

Rapid growth

Big Yellow Group (LSE: BYG) is a good example. Over the past five years, shares in the company have returned 183% excluding dividends. Including dividends, the total return is closer to 200% and today’s results from the company show that these returns are not going to come to an end anytime soon.

Revenue for the fiscal year ending March 31 rose to £109.1m from £101.4m as like-for-like sales increased by 6%. Adjusted pre-tax profit grew to £54.6m from £49m.

Off the back of these figures, management has announced a total dividend for the year of 27.6p, up from 24.9p for the year before. Based on this dividend the shares currently yield 3.6% and trade at a forward P/E of 20.3. City analysts expect the company to increase the payout further next year to 30p, giving a dividend yield of 3.9%.

Outperforming

Safestore Holdings (LSE: SAFE) is another potential retirement REIT. Over the past five years, shares in the company have returned 305% or 360% including dividends. For some comparison over the same period, the FTSE 100 has produced a paltry return of only 42.5%.

Unfortunately, shares in Safestore are not particularly cheap, and City analysts expect the company’s earnings per share to fall by 48% to 21.8p this year. Considering that the shares trade at a forward P/E of 18.6, this lack of growth is concerning. Still, the company’s most attractive trait, its dividend yield, remains robust.

This year analysts expect shares in the company to yield 3.2%, and even though earnings are set to fall, the payout will be covered twice by earnings per share.

Secure income

If you’re looking to fund your retirement, then Secure Income REIT (LSE: SIR) should be considered. The company does what it says on the tin. Management is looking to provide a stable income above all else, and at the time of writing, shares in the firm offer the highest yield of those covered in this article. Specifically, the shares currently support a dividend yield of 4% and trade at a forward P/E of 25.7, which may look expensive but this company’s primary goal is income, so it may be best to concentrate on yield only.

Secure Income’s most attractive quality has to be the fact that the company’s property portfolio contains 20 freehold private hospitals, giving it an extremely stable income stream from defensive assets.

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Rupert Hargreaves 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.