Here’s why the Unite Group share price could keep on soaring

Unite Group plc (LON: UTG) has provided top dividends plus growth, and there could be plenty more to come.

| 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.

If you want to see how you can make a lot of money from property other than building and selling into a rising market, take a look at Unite Group (LSE: UTG).

The company, billing itself as “the UK’s leading manager and developer of student accommodation,” has seen its earnings per share more than double in the four years from 2013 to 2017. And though that rate of growth is likely to slow, first-half results on Tuesday make it look like 2018 is living up to expectations.

Unite recorded a 15% rise in EPS (with an 11% uplift currently forecast for the full year), as chief executive Richard Smith told us: “We have delivered further increases in our sustainable and recurring earnings and maintained strong cash flows.

The beauty of that cash flow has been showing though in dividends, which have been boosted from 4.68p per share in 2013 to 22.7p last year. Cover by earnings has come down over that period as the firm moves from its early expansion phase and is starting to look more like a mature cash cow, and that was strengthened by the announcement of a 30% hike to the 2018 interim dividend. That’s slightly ahead of full-year forecasts, but is in line with the company lifting of its dividend payout ratio to 85% of EPRA earnings.

Net cash flow of £46m (up from £38m a year ago) also helped get net debt down a little, from £803m at December 2017 to £770m. But net debt should rise as Unite plans to increase capital expenditure on new investment and development.

My colleague Rupert Hargreaves recently took a look at Unite’s asset valuation figures, but suggested that the firm’s commitment to long-term sustainable earnings is really what it should be valued on. I agree.

Another strong FTSE 250 dividend

If you’re looking for another top dividend payer, Man Group (LSE: EMG) shares have been a bit erratic over the past five years — but we’re still looking at an almost doubling in price over the period.

I reckon the hedge fund manager has got itself into a pretty good shape for the long term, and it looks to me like an investment that can bring in attractive total rewards over the coming decade.

Dividends are only a part of that, with well-covered yields of 5.2% and 5.6% predicted for 2018 and 2019 respectively. On top of the annual cash, Man Group has also been buying back its own shares for some months, after announcing a total of up to $100m to be earmarked for the purpose in April.

That came after a very strong 2017, which resulted in net inflows of $12.8bn  and positive investment performance of $10.7bn. And that seems to be continuing into 2018, with the first quarter bringing net inflows of $4.8bn. But negative investment performance of $1.8bn as the quarter was described as offering “a weaker environment for equity markets and momentum strategies.

But that’s the nature of Man’s hedge fund management approach, and I think investors should ignore performance on a quarter-by-quarter basis as that’s likely to be erratic in the short term — a caution aired by fellow Fool writer Roland Head at the time.

If you can forget short-term market movements and are looking more to building a long-term retirement nest egg, Man is a rare opportunity to invest in this market.

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.

Alan Oscroft has no position in any of the 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.

More on Investing Articles

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Here’s how I’d target £496k in FTSE 100 shares and £19k of passive income in a Stocks & Shares ISA

I invest as much surplus cash as I can at the end of the month in my Stocks and Shares…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Is Rolls-Royce’s share price an irresistible bargain?

Is Rolls-Royce's share price the FTSE 100's greatest bargain today? Royston Wild explains why he would -- and wouldn't --…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Is the Vodafone share price a wonderful bargain or a horrible value trap?

As the Vodafone share price continues to fall, is it now a stock to buy with a view to a…

Read more »

Hand of a mature man opening a safety deposit box.
Investing Articles

I’d buy 95,239 shares of this banking stock to generate £200 of monthly passive income

Muhammad Cheema takes a look at how Lloyds shares, with a dividend yield of 5.9%, can generate a healthy monthly…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Can FY results give the Antofagasta share price a long-term boost?

The Antofagasta share price has had a good five years. Now the company says it's set to enter a new…

Read more »

Person holding magnifying glass over important document, reading the small print
Dividend Shares

Can I make sustainable passive income from share buybacks?

Jon Smith notes the rise in share buybacks from FTSE 100 companies, but flags up why they aren't great for…

Read more »

Front view of a mixed-race couple walking past a shop window and looking in.
Investing Articles

After the Currys share price rockets, here are more potential UK takeover targets!

The Currys share price has surged 39% higher in response to news of a takeover bid. Which UK stocks could…

Read more »

Investing Articles

Down 25%, where will the British American Tobacco share price go next?

The British American Tobacco share price has taken a hit. But this Fool isn't deterred. He think's now could be…

Read more »