London and the South East have been UK’s two best-performing regions regarding property price growth over the past few decades.
There are some signs that now, after years of explosive growth, the market is starting to soften, but this does not appear to be impacting McKay Securities (LSE: MCKS).
Steady income growth
Today the firm reported its results for the six months ended 30 September and the results were broadly positive. Net rental income grew 8.2% year-on-year, while adjusted profit before tax rose 6% to £4.7m. The group’s net asset value, a more accurate representation of value creation for real estate investment trusts like McKay, ticked higher by 3% to 312p from 303p at the end of March 2017.
Off the back of these robust figures, management announced a 3.7% increase in the company’s dividend payout.
Based on these half-year figures, it looks as if the company is on track to outperform City expectations for the full-year.
Indeed, in the run-up to today’s release, analysts have been expecting a pre-tax profit of £8.7m for the full year, and dividend growth of just over 1%. It now looks to me as if the firm is set to earn £9.4m for the year with an inflation-busting dividend increase of 3.7%.
Active in one of the most buoyant property markets in the world, I believe that McKay is a great buy for income seekers. The real estate investment trust offers a relatively defensive income from property, and the asset value is supported by bricks and mortar.
What’s more, it looks as if the shares are deeply undervalued at current levels. At 233p, shares in McKay are trading at price-to-book ratio of 0.75, implying an upside of 33% if sentiment towards the business improves and the shares re-rate. As well as this discount, the shares support a dividend yield of 4%.
Undervalued growth and income
Another dividend stock that looks to me as if it could help you make a million with little risk is Workspace (LSE: WKP).
The company, which “offers highly designed and super-connected space to businesses on flexible terms” recently reported a 21% year-on-year growth in net rental income for the first half thanks to high demand from customers for its properties. Net asset value for the six months to 30 September rose by 6.4% to £10.14 so, once again, at 930p the stock is trading at a price to book value of less than one.
Workspace offers the rare combination of both growth and income that’s backed by property. The shares currently support a dividend yield of 2.8%, and City analysts have pencilled in earnings per share growth for the group of 16% this year followed by growth of 12% for the financial year ending 31 March 2019.
Over the past five years, the company’s earnings per share have grown three-fold. Over the same period, the dividend payout has risen 170%.
With a steadily growing dividend distribution, rising earnings and a property-rich balance sheet, Workspace looks to me to be another top ‘safe’ dividend stock.
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Rupert Hargreaves owns no share 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.