The stable returns available from property makes the asset the perfect investment to retire on. However, while some investors might choose buy-to-let investing as a way to supplement their pension pot, this avenue is unavailable to many due to the high initial capital requirements.
Real estate investment trusts offer the perfect alternative. Designed as a tax efficient way for investors to gain access to property without having to buy the properties themselves, REITs are a great asset to diversify your portfolio, and their returns are almost as stable as a physical property investment.
Big Yellow Group (LSE: BYG) is a good example. Over the past five years, shares in the company have returned 183% excluding dividends. Including dividends, the total return is closer to 200% and today’s results from the company show that these returns are not going to come to an end anytime soon.
Revenue for the fiscal year ending March 31 rose to £109.1m from £101.4m as like-for-like sales increased by 6%. Adjusted pre-tax profit grew to £54.6m from £49m.
Off the back of these figures, management has announced a total dividend for the year of 27.6p, up from 24.9p for the year before. Based on this dividend the shares currently yield 3.6% and trade at a forward P/E of 20.3. City analysts expect the company to increase the payout further next year to 30p, giving a dividend yield of 3.9%.
Safestore Holdings (LSE: SAFE) is another potential retirement REIT. Over the past five years, shares in the company have returned 305% or 360% including dividends. For some comparison over the same period, the FTSE 100 has produced a paltry return of only 42.5%.
Unfortunately, shares in Safestore are not particularly cheap, and City analysts expect the company’s earnings per share to fall by 48% to 21.8p this year. Considering that the shares trade at a forward P/E of 18.6, this lack of growth is concerning. Still, the company’s most attractive trait, its dividend yield, remains robust.
This year analysts expect shares in the company to yield 3.2%, and even though earnings are set to fall, the payout will be covered twice by earnings per share.
If you’re looking to fund your retirement, then Secure Income REIT (LSE: SIR) should be considered. The company does what it says on the tin. Management is looking to provide a stable income above all else, and at the time of writing, shares in the firm offer the highest yield of those covered in this article. Specifically, the shares currently support a dividend yield of 4% and trade at a forward P/E of 25.7, which may look expensive but this company’s primary goal is income, so it may be best to concentrate on yield only.
Secure Income’s most attractive quality has to be the fact that the company’s property portfolio contains 20 freehold private hospitals, giving it an extremely stable income stream from defensive assets.
Rupert Hargreaves has no position in any 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.