If you have just £2,000 to invest in a Stocks and Shares ISA, then I highly recommend deploying some of this cash into flexible office provider IWG (LSE: IWG).
IWG, or Regus as it was formerly known, calls itself a “global operator of leading co-work and workspace brands.” Business is booming in this section of the office market as self-employment and flexible working becomes the norm for millions of workers around the world who want more from their jobs. Larger companies are also rushing to lease space because providers like IWG offer more flexible contracts, unlike traditional leases, which can tie tenants in for decades.
IWG has invested hundreds of millions of pounds in its office estate in the past few years to attract more customers and it seems to be working.
Earnings growth
For the six months ended 30 June, revenue increased 17.3% in actual currency, and gross profit increased 7% year-on-year. Profit after tax, including discontinued operations, jumped 579% to £294m. Earnings per share from continuing operations came in at 4.2p for the first half of IWG’s 2019 financial year.
Its income in the period received a boost from its £320m partnership transaction in Japan, which was just one of the “multiple” franchise agreements the group has signed over the past few months. Including cash generated from operations, this transaction boosted IWG’s cash inflow to £385m in the first half.
Management is investing around two-thirds of this income back into its office portfolio, and the rest is being paid out to investors. The interim dividend is rising 10.3%, and the firm is spending £100m repurchasing shares.
These results seem to put the company well on the way to meeting City growth forecasts for the year. Analysts have pencilled in earnings of 12.3p per share for 2019, and 14p for 2020, putting the stock on a forward P/E of 29.3. This is above what I would usually be willing to pay for a low-growth business like IWG.
However, the company’s international presence, cash generation and record of returning excess funds to investors lead me to the conclusion that this might be an attractive investment for your stocks and shares ISA today. The dividend has doubled over the past five years, and the current yield stands at 1.9%.
Defensive income
Another income investment that I think might be worth your research time is healthcare facility provider Assura (LSE: AGR). I think this healthcare real estate investment trust is one of the most defensive investments you can buy today.
The business model is simple. The company buys specialist healthcare facilities and then leases them to healthcare providers, predominantly the NHS. This model generates a steady stream of income, which it then returns to shareholders. Over the past five years, Assura’s dividend yield has grown by around 50% as its property portfolio has nearly tripled in value.
Today, shares in the healthcare REIT support a dividend yield of 4.3%, and analysts believe the payout will increase by 4% by 2021, giving a yield of 4.5%. Book value per share (the total value of the company’s property assets minus borrowing) was 53.4p at the end of its last reported financial year. On this basis, the stock is currently trading above book value, but once again, I think it’s worth paying a premium to get your hands on shares in this one-of-a-kind business.
