If you are looking for a reliable long-term income stream, you might want to think inside the box. Due to its structure as a real estate investment trust (REIT) Tritax Big Box (LSE: BBOX) has to pay out 90% of its rental profits as dividends, funding a steady flow of regular payouts into the future.
Tritax rents out warehouses to customers with a weighted average unexpired lease term of 14.1 years, reducing volatility further. Today it published interim results for the six months to 30 June, and these further confirm its dependability. The half-year results showed a 5.3% increase in earnings per share (EPS) to 3.38p, as the company expanded its portfolio, increased rents and kept expenses under control.
Total return for the period was 5.1%, against a medium-term target of at least 9% a year. Tritax also declared fully covered dividends of 3.35p per share, up 4.7% year-to-date, putting it on track to hit its full-year target of 6.7p. It currently offers a forecast yield of 4.3%.
The company is the only REIT to gives investors pure exposure to UK big box logistics, a growing sector as online shopping smashes the high street, and warehouses spring up at every motorway junction. Tritax has also proved adept at snapping up new assets ahead of its rivals.
Its high forward valuation of 21.3 times earnings suggests that investors are happy to pay a premium for its reliable income benefits. Growth prospects are modest, although the stock is up 29% in three years. As I have written earlier, it could even benefit from a bad Brexit. Tritax still has the REIT stuff for your portfolio.
Monarch of the GLEN
FTSE 100-listed mining giant Glencore (LSE: GLEN) posted solid first-half profit growth yesterday but disappointed investors by failing to increase its $1bn share buyback programme. It has also underperformed its major rivals lately, the share price dipping 5% over the last year, against 9% growth at Rio Tinto, 23% at BHP Billiton and 31% at Anglo American.
Glencore posted 13% in net profits to £2.8bn while adjusted earnings rose to $8.3bn, with strong performances from its industrial and marketing businesses. But it had nothing to say on the ongoing money-laundering investigation into its African business by the US Department of Justice.
Ivan the man
Commodity demand is healthy but the market remains volatile. Despite this, CEO Ivan Glasenberg claims the group’s share price materially undervalues the business. Trading at a forecast 8.5 times earnings, he may have a point. Especially with EPS forecast to jump 43% this year (before dipping 1% in 2019). I was also happy to see net debt cut from $10.7bn to $9bn, and expected to fall further.
Of course there are macro worries, such as a China slowdown, the potential fallout from a continuing trade war and the stronger US dollar, which pushes up the price of commodities to buyers in other currencies. Plus those unknown litigation risks as well. However, with a forecast yield of 4.3%, covered 2.3 times, Glencore looks a buy to me, if not quite a screaming buy, and you may want to investigate the other FTSE 100 mining stocks before committing yourself.
harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Tritax Big Box REIT. 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.