2 family-owned businesses to retire on

These family-led firms offer growth, dividends and a long-term approach investors should love.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

We here at the Motley Fool tend to love founder-led companies as they normally mean great management teams with a huge incentive to run the company well over the long run. Sadly, they aren’t many of them left these days, but of the few that are left a handful make a compelling investment thesis.

Arbitrage at its best 

The first one on my list is Mountview Estates (LSE: MTVW). Its founder no longer runs this £400m market cap company but this is entirely forgivable as it was established all the way back in 1937. Furthermore, the company is now run by the co-founder’s son and he and the wider family own around half of all outstanding shares, giving them plenty of skin in the game.

Befitting a family-run company with a long history, its business model is buying at a steep discount buildings with flats that have regulated rents below market value and then waiting, sometimes decades, for these flats to become unoccupied and selling them on at market value.

While no new regulated tenancy properties have been created since 1988, the company still has a very large and constantly evolving portfolio of just under 4,000 properties as of the end of fiscal year 2016. Since around half of all its properties are in London and another 33% in the Home Counties, it has benefited from rising property values there.

In each of the past four years rising sale prices have led to double-digit increases in earnings and allowed dividends per share to nearly double to 300p in 2016. This is still a very conservative one-third of earnings, but shareholders still enjoyed a respectable 2.7% annual yield.

Management’s conservative approach to shareholder returns also carries over to its policy towards debt as the gearing ratio was a very low 11.8% at year-end. This healthy balance sheet means the business is in a good position to benefit from any downturn in the property market as it will have the financial firepower to make deals at an even deeper than normal discount.

Shares of Mountview are pricey for a property firm at 12 times trailing earnings but with a very long history of rewarding shareholders since going public in 1960 I reckon this business is one to hold for the long term.

A truly long term outlook

Another family-run business with a long history of keeping shareholders happy is iron foundry Goodwin (LSE: GDWN). Despite being set up in 1883, it is still run by a Goodwin and the family retains a large stake.

It has been in a holding pattern in the past few years as the downturn in oil, gas and commodities prices has significantly dampened demand for the company’s valves, pumps and other industrial products. However, management has been through many, many downturns before and was prepared for this one.

It has invested in recent years in expanding its capabilities into creating products for the aerospace, jewellery and automotive industries that are paying off and keeping it highly profitable even during the downturn in energy markets. In the nine months to January the diversification helped increase sales from £87m to £105m year-on-year, although pre-tax profits fell from £9m to £8.2m.

With a long history of adapting to ever-changing market demands and a proven ability to withstand very deep market downturns Goodwin is one share I’ll be looking at more closely once energy markets rebound.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ian Pierce has no position in any shares mentioned. The Motley Fool UK owns shares of Mountview Estates. The Motley Fool UK has recommended Goodwin. 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.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

1 Warren Buffett stock I’m buying now

Coca-Cola is the fourth-largest holding in Warren Buffett’s Berkshire Hathaway. I’ll explain why I’m following Buffett and buying more.

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

I bought 4,403 Lloyds shares in June and 4,856 in September. Here’s what they’re worth now

Harvey Jones thought he was bagging a FTSE 100 bargain when he bought Lloyds shares on two occasions last year.…

Read more »

Young woman holding up three fingers
Investing Articles

I’m itching to buy these 3 hidden FTSE gems in a Stocks and Shares ISA

Harvey Jones is keen to add these three FTSE 100 companies to his Stocks and Shares ISA before April. Only…

Read more »

Close up of a group of friends enjoying a movie in the cinema
Investing Articles

How I’d try and turn just £1 a day into a fabulous £54,485 passive income for life

By investing small, regular sums in FTSE 100 shares I can potentially generate a huge passive income stream. It won't…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

I’d aim for a million buying under a dozen shares

Christopher Ruane explains why less could be more when it comes to building a share portfolio if he wants to…

Read more »

Investing Articles

Rolls-Royce shares are up over 1,000% since 2020! Am I too late to buy?

Rolls-Royce shares now cost over tenfold what they did in the firm's 2020 rights issue. Our writer thinks they may…

Read more »

Investing Articles

1 top UK growth stock for my tech portfolio in 2024

Up 30% in just one year, this growth stock looks positioned to continue on the path of substantial gains, according…

Read more »

Buffett at the BRK AGM
Investing Articles

I’d follow Warren Buffett to target effortless passive income

Warren Buffett knows a thing or two about building passive income streams. By learning from the Sage of Omaha, so…

Read more »