Staking out dividend stocks is a perilous business today. With earnings either toppling, or threatening to reverse sharply, UK companies of all colours continue to sacrifice their dividends. It means investors need to look a little further afield in the search for big income.
There are some choice small-caps out there managing to weather the storm however. Target Healthcare REIT (LSE: THRL) is one, and this comes as no surprise to this Fool at least. Target invests in care homes, a clearly-defensive endeavour and one with great earnings visibility, whatever broader economic conditions are like.
This is why City analysts expect annual profits to keep rising, despite the Covid-19 crisis. In the current financial year to June 2021, an 11% earnings improvement is anticipated. This leads to predictions of more dividend growth and, thus, a chunky 6% yield too.
Target Healthcare is clearly in the box seat to benefit from Britain’s rapidly ageing population. This makes it a great buy beyond the here-and-now. Yet it trades on a quite-undemanding earnings multiple of 15 times for this year. I reckon it’s a white-hot buy.
Tritax Eurobox (LSE: EBOX) is another brilliant pick for dividend investors. I recently wrote a piece on its FTSE 250 cousin Tritax Big Box. I explained why providers of ‘big box’ warehousing distribution and warehousing hubs are onto a winner. It’s no secret that e-commerce is becoming increasingly big business. However, the rate at which some market experts expect this particular retail segment to swell suggests share pickers need to get on board in some way, shape, or form.
Experts at data research firm Statista, for example, expect the e-commerce channel to almost double in value over the next few years. They expect a market worth $3.53trn in 2019 will swell to be worth $6.54trn by 2022.
More big dividend yields
However, it’s important to note that Statista’s estimates were released in March. It’s a dot on the card that they fail to reflect the jump in e-commerce adoption as a result of coronavirus-related lockdown measures more recently. That forward forecast would likely be more bullish if calculated today.
So back to small-cap Tritax Eurobox. This is a company which operates a network of sites on the continent, but mainly in Central and Eastern Europe. Like its FTSE 250 relative, which operates solely in the UK, this puts it in markets where the internet shopping phenomenon is particularly large. Countries such as Germany and Poland have some of the fastest-growing e-commerce markets anywhere on the planet.
Therefore, it’s no wonder Tritax Eurobox carries a premium. City analysts reckon annual earnings will sink 28% in the current financial year to September. But its sound long-term outlook means that, in my opinion at least, it warrants a chunky forward price-to-earnings (P/E) of 23 times.
Besides, value-chasers can take consolation from Tritax Eurobox’s chunky dividend yields. At 4.9%, the small-cap provides a rare bright spot in a sea of dividend cuts, postponements, and outright cancellations.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Tritax Big Box REIT. 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.