How this FTSE 250 dividend stock could help you overcome an inadequate State Pension

This FTSE 250 (INDEXFTSE: MCX) dividend stock could boost your retirement income.

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The government’s new State Pension gives retirees an income of just £164.35 per week, or £8,546.20 a year. For many, this income is unlikely to be enough in itself to sustain a comfortable retirement.

So today, I’m looking at two dependable dividend stocks that could help you top up your state income.

Student digs

Unite Group (LSE: UTG) is a leader in the student housing sector. At the end of July, the company announced that it would be operating 52,000 beds for the 2018-2019 academic year with a further 6,500 beds in its development portfolio. Management believes these new beds could add 11p-13p to earnings per share (EPS) over the next few years. As analysts are expecting EPS of 24p for 2018, it’s clear how much of an impact this growth will have on the firm’s bottom line.

In my view, Unite is a great income investment for your retirement portfolio.

And it seems I’m not the only one who likes student property as an investment. Today, the company announced it is selling its share of 14 properties, comprising of a total 3,436 beds, for £180.5m to Singapore Press Holdings. Unite’s share of this disposal is £84.7m. Agreed at a price slightly below book value for the assets, in my opinion, this deal shows demand for student property from institutional investors is strong and isn’t suffering from the same Brexit paralysis as other industries.

Following the sale of these assets, according to management, beds at high- and mid-ranked universities will account for 90% of Unite’s portfolio. The cash will also push the group’s loan-to-value ratio down to 25%.

City analysts reckon the company will distribute 28.8p to investors in 2018 and 33.2p in 2019, giving a forward dividend yield of 3.8%. And, as Unite continues to develop new assets, I think this will be just the start of the share’s dividend growth. 

So, if you are looking for a defensive, reliable income stock for your portfolio, I believe Unite is indeed worthy of further research. 

Market leader 

Another student property business with news out today is real estate investment trust (REIT) GCP Student Living (LSE: DIGS).

GCP is asking investors for £55m by way of a placing at 149.5p to part fund the acquisition and development of two new properties in Brighton, Circus Street and Scape Brighton. According to management, these two new properties will provide 1,000 new beds in total in “a market with strong student numbers and restrictive planning.” Indeed, according to the press release, Brighton has only 6,800 student beds available, of which only 240 are in “direct let private purpose-built student accommodation.” 

So it looks as if GCP’s efforts to expand in this market are sensible. The placing is being done at just a 3.1% discount to the stock’s closing price at the end of last week, and a 1.9% premium to the group’s prevailing net asset value of 148p. That shows just how keen investors are to put cash to work in the rapidly expanding student accommodation market.

As GCP expands into Brighton, I think now could be a great time to add this defensive income and growth play to your portfolio. With a dividend yield of 4%, I think it may even be a better buy than Unite.

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.

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.

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