S&U has been around for decades and during this time it has built a leading motor finance and bridging loan business, which has generated tremendous returns for investors.

One of the reasons why I think the business has been able to outperform many of its peers in the industry is the fact that the group is still family-owned.

Research shows that family-owned businesses tend to perform better over the long term compared to non-family-owned because the family members make better long-term capital allocation decisions. In other words, they prioritise long-term investment over short-term profitability.

That certainly seems to be right with S&U. Over the past six years, the company’s earnings per share have more than doubled, rising at a compound annual growth rate of around 16% since 2014. The per share dividend has been increased by 100% since 2014. And it doesn’t look as if the firm is going to slow down any time soon. 

Beating the market 

In a trading update published today ahead of S&U’s half-year numbers, which will be released at the end of September, the company said: “In contrast with the current low levels of consumer confidence in the UK, demand for Advantage’s motor finance is healthy and transactions are ahead of last year.“

Customer numbers at Advantage, S&U’s motor finance business, are up 7% year-on-year according to the report, and the rest of the business is trading in line with expectations.

Commenting on the outlook for the market, S&U said that “despite a recent downturn in the new car market, the used car market remains robust and is likely to continue to do so, even assuming a no-deal Brexit.“

City analysts are currently expecting the company to report earnings per share growth around 7% this year, putting it on a forward P/E of 8.5. A full-year dividend of 124p is also expected to give a dividend yield of 5.9%.

Opportunity to buy

If S&U is not for you, then Tritax Big Box Reit (LSE: BBOX) could also offer market-beating returns. This real estate investment trust invests in logistics facilities around the UK, and business is booming.

According to its results for the six months ending 30 June, Big Box’s portfolio value has increased by nearly 13% since the end of 2018, and the contracted rent roll is up almost 4%. On the back of this growth, management has decided to increase the firm’s interim dividend by 2.2%. 

This is just the latest in a string of dividend increases from the company. The distribution has grown at a compound annual rate of around 8% since 2014 as Big Box’s book value has quadrupled. After this growth, the dividend yield currently stands at 4.7%, with further increases likely as the firm continues to invest in its portfolio. Rent increases should also help push earnings and the dividend higher. 

After a recent pullback, shares in Big Box are currently changing hands at a forward P/E of 21 and book value per share of just 1.1 — one of the lowest multiples placed on the stock for some time. I think investors should make the most of this opportunity and snap up shares in this leading industrial property owner today.

The post £3k to invest? I’d buy these 2 dividend growth stocks without delay appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended S & U and Tritax Big Box REIT. 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.

That said, there are other areas of the UK property market that offer investment appeal right now. And one area that is booming at present is the warehouse sector. Once considered a boring sub-sector of the property market, demand for warehouses is skyrocketing thanks to the boom in online shopping. So how can savvy investors profit?

Strong demand for warehouse space

It’s no secret that the way we shop has changed dramatically over the last decade. Gone are the days of wandering the high street for hours looking for a new TV, pair of shoes, or dress – these days consumers are often likely to visit websites such as Amazon, ASOS, or Boohoo and order their goods online.

Naturally, this shift to online shopping has created a strong demand for warehouse space, as online retailers need somewhere to store their goods. Indeed, according to the CBRE 2018 Global Industrial & Logistics Prime Rents report, the online shopping boom has doubled the demand for warehouse space in the last decade.

For every extra £1bn of online retail sales in the UK, retailers need to find an additional 1.125m square feet of distribution space. Yet it’s not always straightforward to locate new warehouses – supply is limited and build costs are high. So, there are attractive supply and demand dynamics at play here. And companies that specialise in managing warehouse space are profiting.

An easy way to profit

One of my favourite ways to play this theme is FTSE 250 stock Tritax Big Box (LSE: BBOX) – a property company dedicated to investing in very large logistics facilities known as ‘big boxes’. The £2.5bn market cap group owns an enviable portfolio of big boxes across the UK that are typically fully-let on long leases to blue-chip tenants such as Amazon, B&Q and Argos, meaning the group looks well placed to generate consistent returns for investors in the years ahead.

Full-year results from Tritax, released in early March, showed another year of strong progress. The value of the group’s property portfolio surged 31%, while operating profit increased 21%. The company also hiked its dividend by 4.7%, marking four consecutive dividend increases since the group’s first dividend in FY2014, and Chairman Richard Jewson stated that the market had remained “robust” despite Brexit uncertainty.

BBOX shares offer an attractive dividend yield of around 4.5% right now, which can be tax-free if the stock is held in a Stocks & Shares ISA. I’m expecting long-term capital growth here too, despite the fact the stock currently trades on a slightly expensive P/E ratio of 21. Overall, I see BBOX as a much easier way to profit from property than buy-to-let. With online shopping likely to continue to drive demand for warehouse space, the stock looks primed to deliver robust returns for investors in my view. 

The post Buy-to-let looks highly uncertain right now. I’d invest in this property instead appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in Tritax Big Box REIT and Boohoo. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon and ASOS. The Motley Fool UK has recommended boohoo group and Tritax Big Box REIT. 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.

Worrying threat

My biggest concern remains the threat of the German discount supermarkets – Lidl and Aldi (just recently Aldi was awarded the title of ‘Best Grocer’ at the Retail Week Awards). These two companies continue to aggressively grab market share, and I think this trend could continue for a while, which will put pressure on Tesco and the other large supermarkets.

The statistics are alarming for the traditional supermarkets. For example, according to research firm Kantar Worldpanel, for the 12 weeks to 30 December, all the major supermarkets lost market share, while Aldi’s sales jumped 10.4%, and Lidl’s by 9.4%. This took their combined market share to a record high of 12.8%, up an impressive 12% on the year before. Interestingly, around two-thirds of UK households visited an Aldi or Lidl over Christmas, which goes to show the popularity of these businesses today.

For the year ending 24 February 2020, analysts expect Tesco to generate earnings of 16.9p per share and pay out 7.3p in dividends. That places the stock on a forward P/E of 13.6, while the forecast dividend equates to a prospective yield of 3.2%. While the shares are not particularly expensive, I’m not seeing enough value on the table to convince me that they’re worth buying right now, given the challenging landscape.

A better dividend stock?

One stock that I think offers more appeal than Tesco right now is FTSE 250-listed Tritax Big Box (LSE: BBOX). This is a real estate company that is dedicated to investing in very large logistics facilities known as ‘big boxes’. These play a fundamental role in today’s retail environment, as they are used by online and omnichannel retailers such as Amazon, B&Q, and Argos to hold goods before they’re distributed to customers. Essentially, Tritax offers a way to profit from the boom in online shopping.

It owns an enviable portfolio of big boxes that are typically fully-let on long leases to blue-chip tenants, and this should help the company generate consistent returns for investors in the years ahead, irrespective of what happens with Brexit. Just recently, the group reported an 8% rise in adjusted earnings per share for 2018 and Chairman Sir Richard Jewson commented: “The quality of the Group’s portfolio and customer base mean that we are confident of continuing to deliver secure dividends to shareholders, resulting in attractive returns in a low-interest rate environment.”

Since its stock market listing in 2013 Tritax has built up a nice dividend growth track record and for 2019, the group is targeting a payout of 6.85p per share, which at the current share price, equates to a healthy yield of 4.8% – 50% higher than Tesco’s forecast yield. The shares currently trade on a forward P/E of around 20, which I believe is a reasonable price to pay for this niche property stock, and as such, I rate the stock as a ‘buy’ right now. 

The post Tesco shares? Don’t waste your money. I’d buy this dividend stock instead appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in Tritax Big Box REIT. The Motley Fool UK has recommended Tesco and Tritax Big Box REIT. 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.

Big and boxy

I’m looking at two top dividend stocks today, one of which you will know about. FTSE 100-listed oil giant BP (LSE: BP) is a household name but it’s still worth reminding people that it currently yields an income of 5.9% a year, four or five times the return you will get on a best-buy savings account.

The other is less well known. FTSE 250 real estate investment trust Tritax Big Box (LSE: BBOX) this morning reported an 8% rise in its adjusted earnings per share (EPS) to 6.88p in its full-year 2018 results, while operating profits jumped 21.3%.

Give me land

Tritax invests in big box distribution centres, and its tenants include impressive names such as Amazon, Argos and B&Q. Its portfolio is valued at £3.42bn and covers 54 assets and 114 acres of strategic land, including forward commitments.

Today, it reported a 7.4% increase in EPRA net asset value to 152.83p, with a total return of 12.1%, above its medium-term target of more than 9% a year. Its portfolio’s contracted annual rent roll increased 27.9% to £161.12m.

Brexit worry

Chairman Sir Richard Jewson said while “lack of clarity over Brexit presents a substantial uncertainty for the UK economy, our market has remained robust” as occupiers continue to search for space, rents rise, and yields harden. This has reinforced the favourable dynamics for landlords, even if Brexit presents a significant risk for the UK economy.

He said the £2.45bn group’s portfolio of customers should secure the flow of dividends, “resulting in attractive returns in a low interest rate environment.” 2018 dividends totalled 6.70p per share, up 4.7% year-on-year. Tritax currently yields a forecast 4.8%. Earnings forecasts look steady at 3% this year and 5% in 2020. However, it’s not screamingly cheap, currently trading at just over 20 times earnings.

Oil recovery

BP may excite you more. My big worry is that its share price bobs up and down in line with the oil price, and there’s not much you can do about that. You could say that about pretty much every oil and commodity stock, though. The share price is up 14.5% over the past 12 months as fears of a global economic slowdown seemed to have eased for now. 

You can take a view of the long-term direction of the oil price. Will electric cars destroy demand? Can renewables step up? Will climate change force industry change? These are fun to discuss, but the variables are too great to make sensible predictions. BT is already preparing, pursuing renewable technologies while its shale business is also doing well.

Cash flowing

BP looks promising today, with underlying profits doubling to $12.7bn last year, while its return on capital employed (ROCE) rose from 5.8% to 11.2%. Dividends have been frozen for years (it still pays compensation for the Deepwater disaster and is on the hook for another $2bn this year). But strip that out and cash flows look good. The income growth will come.

Earnings forecasts look promising with 19% growth anticipated this year and 18% next, yet it trades at just 12.6 times earnings. BP still looks a top income buy to me. 

The post Why I’d buy into the BP share price and its massive income stream appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Tritax Big Box REIT. 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 looking to property stocks that I believe have the potential to produce better returns than buy-to-let over the long term, with little-to-no effort on your part.

Online shopping

LondonMetric Property (LSE: LMP) is focused on finding the best retail assets in the UK. These aren’t traditional retail assets, however. The company is looking for urban logistics properties, where retailers prepare and send out orders to customers and shops. As online shopping has boomed, demand for these assets has exploded. 

According to the company’s half-year results published today, the value of its urban logistics properties increased by 4.5% for the six months ending 30 September, at a time when the rest of the property industry is seeing asset values stagnate. Net rental income increased by 5.8% year-on-year.

LondonMetric’s property portfolio also has extremely attractive economics. For example, during the six months to the end of September, the company invested £46.5m in new properties with average lease lengths of 19 years, and 62% of income benefiting from contractual rental uplifts. You don’t get this kind of predictability from buy-to-let investing. Only 6% of leases in the property portfolio are coming up for renewal in the next three years.

With such attractive economics, it’s no surprise that shares in LondonMetric are currently changing hands at a slight premium to the net asset value of 172p. I think this is a price worth paying for the income security the underlying property portfolio provides. 

The stock currently supports a dividend yield of 4.5%. And with the majority of the property portfolio leased on contracts with rental uplifts, I think this distribution should continue to grow steadily for many years.

Big boxes 

FTSE 250-listed Tritax Big Box (LSE: BBOX) operates a similar business model to LondonMetric. The enterprise owns so-called big boxes, which are extensive logistics facilities leased on long leaseholds to companies like Amazon.

From an income perspective, Tritax right now appears to be a better buy than LondonMetric. The dividend yield stands at 4.8%, and just like its peer, the distribution should rise in the medium term as rents tick higher.

Given the increasing importance of e-commerce to the world’s biggest retailers and consumer goods manufacturers, Tritax looks to me to be one of the best property investments on the market right now. 

What’s more, the firm’s balance sheet is relatively debt free, with a loan-to-value ratio of just 25% at the end of June. This gives the company plenty of financial flexibility and scope to expand its portfolio, which it has been doing in recent months. The latest addition is a £89.3m logistics facility in Corby. 

It might not be the most exciting business, but if you’re looking for a steady, predictable income stream, Tritax won’t let you down, in my opinion.

The post Forget buy-to-let, I’m betting on these two property stocks appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Tritax Big Box REIT. 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.