This year has seen the FTSE 250 and other global stock markets experience a period of high volatility. Much of this is due to the potential risks facing the world economy, as well as uncertainty in the minds of investors. Looking ahead, it wouldn’t be a major surprise if more volatility is yet to come, given the difficulties with inflation and interest rates which could hit the world economy.
As such, companies that are able to offer relatively robust dividend outlooks could become more popular. They may provide investors with a degree of certainty, which is what makes these two stocks worth a closer look right now.
Reporting on Wednesday was RDI (LSE: RDI), a real estate investment trust (REIT). The company’s performance in the first half of its financial year was positive, with its underlying earnings per share rising by 8.2%. This is ahead of its medium term growth target and was boosted by an increase in gross rental income of 2.1% on a like-for-like (LFL) basis.
The company has been able to improve the income-producing capabilities of its portfolio through the recycling of capital out of low-growth assets and into assets which offer stronger long-term potential. With an occupancy level of 97.3%, the company appears to have a solid outlook, which could help to boost dividend payments in future years.
In fact, RDI currently has a rather enticing income outlook. It has a dividend yield of 7.7%, which makes it one of the highest-yielding shares in the FTSE 250. With the stock trading on a price-to-earnings (P/E) ratio of 14 and offering a relatively robust growth outlook, it could become increasingly popular if stock market volatility remains high.
Also offering strong income return potential within the REIT sector is Assura (LSE: AGR). The manager and developer of surgery buildings and healthcare centres has experienced a positive period in recent years when it comes to dividend growth. Shareholder payouts have doubled in the last four years, and this puts it on a dividend yield of 4.6% at the present time.
With further dividend growth of 10% per annum forecast over the next two financial years, the stock could provide its investors with a rising real-terms yield even if inflation returns to a higher level as Brexit talks progress.
Certainly, there are companies which offer stronger earnings growth and a lower valuation than Assura. Its P/E ratio of 23 may seem rather high, but due to its relatively low level of risk and its long-term growth potential it could be worthy of a premium valuation.
Therefore, from an income investing perspective it may become increasingly popular as investors continue to seek income-producing assets which offer a robust outlook in a volatile set of market conditions. And since interest rate rises could be slow and steady, its dividend potential may be worth paying for.
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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.