Finding investments which offer a mix of value and growth potential can be tough. The task is arguably more difficult now that asset prices have risen sharply in recent years, since it means that growth prospects are generally priced-in by investors.
Despite this, there are a number of investment opportunities which could boost your retirement prospects. Here are two prime examples of investment trusts that may deliver high total returns over an extended period.
Releasing a quarterly update on Tuesday was Great Portland Estates (LSE: GPOR). The real estate investment trust (REIT) signed 17 new lettings across 75,500 sq ft during the quarter. This will generate a combined annual rent of £5.3m, which takes its combined annual rent on new lettings since the start of the financial year to £11.3m. The company also settled 11 rent reviews in the quarter, which secured £4.9m of rent. This is 8.7% ahead of the current market rental value and shows that the company is making strong progress.
Looking ahead, the outlook for UK commercial property is rather uncertain. On the one hand, Brexit continues to cause confidence in the sector and the wider UK economy to decline. This may cause rental growth and asset price growth to come under pressure. However, on the other hand a loose monetary policy looks set to remain in place, and this could help to support economic and asset price growth.
With Great Portland Estates forecast to post a rise in its bottom line of 13% in the next financial year, its outlook seems to be positive. The company trades on a price-to-book (P/B) ratio of 0.75, which suggests there is a wide margin of safety on offer as well as a very attractive risk/reward ratio.
Another REIT offering an upbeat outlook is Hammerson (LSE: HMSO). The company could see its shares become increasingly popular if inflation remains stubbornly high. It has a dividend yield of 4.8% at the present time from a shareholder payout which is covered 1.2 times by profit. This suggests that there could be further growth in its dividends – especially since its earnings are forecast to rise by 5% to 6% per annum over the next two years. In fact, dividend growth could easily keep up with inflation without hurting the company’s financial stability.
With a P/B ratio of 0.7, Hammerson also offers strong value credentials. Although it may take time for its valuation to increase, it could easily rise by 50% based on its current net asset value without making the stock overpriced. Certainly, commercial property may offer relatively little in terms of defensive characteristics in the short run. However, in the long run it is likely to see prices rise and this could catalyse Hammerson’s share price and lead to strong growth over a multi-year time period.
Peter Stephens 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.