The Motley Fool

Forget buy-to-let! I like these FTSE property stocks yielding 5.5% and 11.7%

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.

One pound coin
Image source: Getty Images.

Many buy-to-let landlords have enjoyed handsome returns in recent years. However, the future may not be as bright, especially for smaller landlords. Rising costs, red tape and hassle, slowing house price growth (falls in some areas), and radical housing policies by opposition political parties, suggest the outlook for buy-to-let could be less profitable and more uncertain.

Discounts and dividends

By contrast, a number of property companies listed on the stock market appear to offer good value and high yields. Many are trading at discounts to net asset value (NAV), giving a margin of safety and scope for long-term capital appreciation. And many are paying generous dividends, providing shareholders with a high level of income.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

These large companies have advantages of scale, including being able to borrow at more attractive rates than private landlords. What’s more, you can buy their shares starting with relatively small sums of money, enabling you to spread risk by investing in a number of businesses.

Two property stocks I’d buy

Residential Secure Income (LSE: RESI), which has a yield of 5.5% at its current share price of 91p, and NewRiver REIT (LSE: NRR), sporting an 11.7% yield at a price of 184p, are two property businesses I’d be happy to buy a slice of today.

RESI, which has a 30 September financial year-end, released its annual results this morning, and NewRiver, which has a 31 March year-end, released its interim results. Let’s have a look at what today’s numbers tell us about these two businesses.

Relatively secure

RESI, which joined the stock market in July 2017, invests in affordable shared ownership, retirement and local authority housing. It said today it’s now substantially committed its available equity capital and borrowings.

It reported a 3.3% increase in NAV per share over the year to 108.6p, which means the shares are currently trading at a discount of 16%. In other words, if you’re buying the shares today, you’re paying just 84p for every £1 of assets.

Annualised net rental income (96% of which is subject to contractual inflation-linked uplifts) increased 6.7% to £11.2m, and shareholders received dividends of £7.7m. The company said rental income will increase in 2020, not only with inflation, but also as its shared-ownership portfolio comes on stream.

I think this all adds up to RESI being an attractive investment, and one whose 5.5% yield, with prospects of inflation-linked annual increases, appears relatively secure.

Higher risk/reward

NewRiver, which floated on the stock market in 2009, operates in the commercial property sector. I like its positioning in value retail and pubs, which I think offers some resilience through the economic cycle. Nevertheless, as its current 25% discount to NAV and 11.7% dividend yield suggest, the market is pricing it as a higher risk/reward proposition.

Today, the company reported a first-half 7% fall in NAV per share to 244p, mainly due to a non-cash reduction in portfolio valuation. Further write-downs are certainly possible, but I think the discount to NAV offers investors a good margin of safety.

The company’s operating cash measure of £26.4m didn’t cover first-half dividends of £30.8m. Management is pursuing strategies to rebuild cover, but clearly there is risk the dividend may have to be reduced. Still, as with the NAV discount, I think the size of the yield offers a margin of safety in the event the dividend’s rebased.

In short, I think NewRiver’s risk/reward balance is attractive.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

G A Chester 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.