Having a buy-to-let property sounds great in theory but, like many of my Foolish colleagues, I think it has the potential to be more trouble than it’s worth.
Aside from the inevitable faff involved in finding suitable tenants and ensuring the house or flat is appropriately maintained and insured, budding landlords must also contend with changes to regulation and tax, the threat of rising interest rates and the possibility of a slowing housing market (or, as some believe, a full-on crash in the event of a hard Brexit).
Taking all this into account and despite recent volatility in the stock market, here are just two deadly-dull, dividend-paying companies that I think are far better destinations for any spare cash.
Dividend stream
Since the likelihood of the entire UK population becoming minimalists overnight is slim, I’m a big fan of companies specialing in self-storage. The business model of renting out space for people to dump stuff they can’t fit in their own homes (but still can’t let go of) is so wonderfully simple relative to the complications of being a buy-to-let investor.
While this simplicity makes for a competitive market, FTSE 250 constituent Big Yellow (LSE: BYG) is the clear leader — a point supported by last week’s interim results for the six months to the end of September.
Revenue grew 7% to £62.2m on that achieved over the same period in 2017 with adjusted pre-tax profit rising 9% to £33.3m. Like-for-like occupancy grew to almost 85% from 81.5% at the end of March with the company maintaining its target of 90% across its estate.
But Big Yellow isn’t resting on its laurels. A recent placing means the company now has a little over £65m in its coffers to develop a pipeline of 11 sites which should, in turn, help earnings tick up for the foreseeable future.
Yielding 3.6% in the current year, Big Yellow isn’t the biggest payer in the market but the recent 9% hike to the interim cash return suggests the company should remain a reliable source of dividends going forward.
The one downside in all this is that, on almost 22 times earnings for the current year, its stock isn’t cheap. As such, a bit of pound-cost averaging may be the best approach.
Steady performer
I’ve been positive on kettle safety control manufacturer Strix (LSE: KETL) ever since it listed on the market back in August last year.
Like Big Yellow, the small-cap is an example of a spectacularly boring business that translates into (what I think is) a fairly compelling investment. Another clear leader, Strix commands a 38% share of the global market in what it does.
September’s interim results contained no big surprises, with the company trading in line with expectations. Revenue crept up 1.5% to a little under £43m with adjusted earnings rising 4.3% to £14.8m over the six months to the end of June. Positively, the firm’s debt pile also continues to fall with a reduction of over 17% to £37.9m achieved over the period.
Arguably a victim of the recent fragility across equity markets, shares in Strix now change hands for almost 25% less than they did in June. An opening share price of 135p this morning leaves the stock trading on just nine times earnings and offering a yield of 5.2%. Contrast the latter with the ongoing hassle of buy-to-let and I know where I’d rather put my money.
