The shares of many UK-focused companies were hit hard in the aftermath of the EU referendum. Some continue to languish at depressed levels, but some have recovered pretty strongly.
Two of the latter have released results this morning, and I reckon these Brexit bouncers continue to offer great value for investors today.
A 56-year unbroken dividend record
Property company Town Centre Securities (LSE: TOWN) owns predominantly retail, office and car parking assets in the north of England, and said “our portfolio has not seen the Brexit effects reported in central London”.
For its financial year ended 30 June, the company posted a 3.8% rise in net assets to 357p a share and a 2.5% increase in earnings to 12.4p a share. Management sees “an extended period of uncertainty” as a result of the Brexit vote, but said it expects three of its development projects alone to add 20p a share to net assets and 3p a share to annual profits.
I rate Town Centre Securities highly. Under the careful stewardship of the founding Ziff family, the company has a relentless focus on delivering long-term returns for its shareholders. This includes the tremendous achievement of a 56-year unbroken dividend record.
The shares have regained 18% since a post-referendum plunge, but at 314p remain at an attractive discount to net assets. The board lifted the annual dividend 5.4% today to 11p, on the strength of its confidence in the increase in earnings from the aforementioned development projects, giving a healthy trailing yield of 3.5%.
The combination of quality of management, discount to assets and dividend yield leads me to rate the shares a buy.
Strength in uncertain times
The UK’s leading homewares retailer Dunelm (LSE: DNLM) is another business whose success has been built by an owner-entrepreneurial family. Will Adderley, son of the founders, sits on the board as executive deputy chairman, but the company has brought in an outside chief executive to further develop the business while maintaining the family business principles and culture.
Dunelm today reported a 7.1% rise in revenue for the 52 weeks ended 2 July compared with the equivalent period last year. Earnings increased 7.4%, while free cash flow was an impressive 26.9% higher.
The company sees Brexit uncertainty less as a risk and more as an opportunity, due to its value-for-money offering, strong cash generation and low leverage. It said today: “In uncertain times our strengths become even more of an advantage. It should mean that we can expand faster and offer even more to our customers”.
The confidence of the company is such that it today announced it’s increasing its ordinary dividend payout ratio. In line with the new policy, this year’s dividend has been increased by 16.7% to 25.1p, giving a useful trailing yield of 2.7%. Meanwhile, the earnings rating is 18.1.
The shares have bounced 25% since their post-referendum low but, due to the strength of the business, I still see them as very buyable on the current earnings multiple and yield.
Brexit survival guide
I'm keen on Dunelm and Town Centre Securities in spite of Brexit, but the vote has certainly changed the outlook for some companies for the worse. That's why the experts at The Motley Fool have written a FREE guide called Brexit: Your 5-Step Investor's Survival Guide.
This guide is essential reading on the risks and also the opportunities of Brexit for investors. It could make a real difference to your portfolio returns in the coming years. To get your copy completely free and without any obligation, simply click here.
G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.