If you think the UK property market is a solid long-term investment, but dont fancy the costs and risks of your own buy-to-let property, then Im with you.
And I say that as the owner of a legacy buy-to-let home that I invested in some years ago when the returns were better. In fact, in a rental void right now, my returns are negative (as Im still paying a mortgage).
Online shopping
Id go straight for property investment firms instead, and I see good value in LondonMetric Property (LSE: LMP). LondonMetrics investment strategy is to concentrate on the retail properties that lie behind the boom in online shopping. Instead of the high-street shops and shopping centres it used to go for, were now looking more at the likes of warehouses and distribution and logistics centres instead.
That approach is doing well for shareholders, with the shares up 39% over the past five years (compared to just 5% for the FTSE 100).
But for a property investment, what Im really looking for is income, and LMP is offering dividend yields in excess of 4%. Theyre progressive too, growing from 7p per share in 2015 to 8.2p this year.
The firm sees bargains in the sector too, and its recommended cash and share offer for A&J Mucklow Group has just been given the nod by the Financial Conduct Authority. The deal valued Mucklows total share capital at approximately 415m, which is a premium of about 20% on its market cap prior to the announcement on 23 May, and I think thats fair value for both sets of shareholders.
LondonMetric shares are on a forward P/E of around 22 and its shares trade at a 16% premium to net asset value as of 31 March, which might look a bit high. But Im seeing an attractive income stream from a company in a potentially high growth segment of its market, and I like that.
Bigger dividend
By contrast, British Land (LSE: BLND) shares are down 26% over the past five years.
Based on net asset value of 905p per share at 15 May, as reported in the companys full-year results, it seems were looking at an astonishing 41% discount. That does need to be seen in the context of the firms year-end debt, which stood at 3.5bn, and I suspect there are fears of that coming to bite the shares if a Brexit-led economic malaise should continue for too long.
But that debt figure is down on last year, and British Land says the interest rate on 87% of its debt is hedged and that its 63% hedged over the next five years. The company does not seem unduly concerned about its debt, and I dont think I am either.
The fall in the shares has pushed up dividend yields, and the 3% rise for this year to 31p per share represents a yield of 5.8% on todays share price. That 31p is slightly less than analysts were predicting, but I see it as a very attractive yield.
Adjusted EPS fell 6.7%, largely down to one-offs, but forecasts suggest modest growth this year.
On a forward P/E of around 16, I think British Land shares are good value as does the company itself, because it is engaged in a buy-back spree right now.
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