You wouldn’t know it from its muted rise in Wednesday trading but Grainger (LSE: GRI) furnished the market with some pretty impressive trading details today.
The stock was dealing just 0.5% higher at pixel time. But such a dull response is hardly a surprise given the ‘wait and see’ approach investors are taking following the frantic buying and selling activity of recent sessions.
In its bubbly release Grainger — the country’s largest listed private landlord — advised that it has “seen good demand for our rental homes and strong rental growth” during the four months ending January. Like-for-like rental growth was up 4.1% in the period, improving from expansion of 3.4% a year earlier.
And on its private rental sector (or PRS) homes, an increasingly-important segment for the Newcastle business, like-for-like rental growth stood at 3% during October-January versus 2.8% a year earlier. Grainger noted “continued strong demand for our rental offering” here in the period.
Elsewhere, residential sales for the four months ended January were stable year-on-year at £29m, it said.
Stunning dividend growth
The FTSE 250 firm has raised dividends at an impressive rate in recent times, even though reliable earnings expansion has remained elusive (indeed, dividends have more than doubled during the past five years). City brokers do not expect either trend to cease just yet either.
In the 12 months to September 2018 a 45% earnings improvement is forecast. And this is expected to underpin a 5.3p per share dividend, up from 4.86p last year.
And despite predictions of a 5% earnings reversal in fiscal 2019, Grainger is still predicted to supercharge the payout to 6.3p. And so a decent-if-unspectacular yield of 1.9% right now leaps to 2.2% for next year. I believe the strong demand for its homes should keep on driving dividends skywards too.
Emerging market master
I reckon now could be a sage time to pile into Ashmore Group (LSE: ASHM) as well. The business is due to release first-half financials tomorrow (Thursday, February 8), and this could lead to a fresh flurry of buying activity.
Last time around Ashmore impressed with news in January that assets under management improved by $4.5bn in the three months ended December, to $69.5bn, thanks to net inflows of $3.6bn and positive investment performance of $900m. The result smashed past broker expectations and reassuringly, sales growth was delivered from “a broad range of clients.”
And the FTSE 250 business advised that more is to come, commenting: “Our 2018 outlook is for another year of outperformance across the range of emerging markets asset classes.” This doesn’t shock me as returns from assets in these far-flung regions continue to outperform.
Just like Grainger, Ashmore may not fit the bill for many growth investors, despite its bright long-term outlook. Sustained profits expansion is expected to remain elusive for some time yet, the business predicted to print a 20% bottom line decline in the year to June 2018. Things are expected to pick up from next year though, a 13% earnings improvement being forecast for fiscal 2019.
However, income chasers may well want to invest in the asset manager given the delicious dividend yields on offer.
The 16.65p per share reward forked out over the past few years is finally expected to rise in the present period, to 17p, meaning a chunky yield of 4.1%. And the dial rises to 4.2% for fiscal 2019 thanks to an expected 17.4p dividend.
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