Finding quality stocks to buy during times of market volatility, like now, is no easy feat. One pick I like the look of is Tritax Big Box (LSE: BBOX). Here’s why I’d buy some shares for my holdings when I next have some cash to invest.
Tritax Big Box is a real estate investment trust (REIT). In simple terms, it is a company set up to acquire and rent out property to yield rental income. The great thing about REITs is that they must return 90% of profits to shareholders as dividends. Tritax invests in and funds the development of large logistics facilities.
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As I write, Tritax shares are trading for 143p. At this time last year, they were trading for 166p, which is a 13% drop over a 12-month period. Recent market volatility due to soaring inflation and rising interest rates has pushed down many shares I class as good stocks to buy.
Pros and cons
From a bullish perspective, Tritax operates in a sector primed for huge growth. The demand for large logistics facilities is only increasing thanks to the e-commerce boom. Online shopping habits have meant many businesses are moving away from traditional bricks-and-mortar stores or at least boosting their online presence. For this, they require logistics properties to operate from. Tritax can benefit here and it already has excellent agreements with powerhouses including Amazon, Tesco, and Ocado.
Next, Tritax has a good record of performance. I can see it has increased revenue for the past four years and profit for the past two years. In addition to this, the shares would boost my passive income with a dividend yield of 5%. This is higher than the FTSE 100 average of 3%-4%. However, I do understand that past performance is not a guarantee of the future and dividends can be cancelled.
Even the best stocks to buy have risks associated with them. The biggest issue for Tritax currently is rising interest rates as this can impact future growth aspirations. Tritax borrows money to fund new properties. Plus, existing debt is costlier to service, which can hinder profits and returns too.
Finally, a cost-of-living crisis has emerged in the UK, which has impacted consumer spending. This has led to many firms reviewing their needs for logistics properties that Tritax provides. There is a chance Tritax could see its performance impacted due falling demand, at least in the short term.
One of my best stocks to buy now
After reviewing the pros and cons, I like the look of Tritax shares currently. Demand for such properties is increasing in the longer term due to the continued rise of e-commerce and online shopping. Tritax shares would boost my passive income, it has a good record of performance, and has some prestigious clients already on its books. I’m not worried about current short-term issues and expect the shares and any returns to only increase in the longer term.