For dividend chasers, Tritax Big Box (LSE: BBOX) is a FTSE 250 share that ticks a heck of a lot of boxes.
Big yields? Tick! Predictions that the provider of huge logistics spaces in the UK will hike the total dividend in 2018 to 6.7p per share from 6.4p last year means that it yields a meaty 4.5%. And the readout moves to 4.7% for next year thanks to the estimated 7p dividend.
A strong balance sheet? You bet. It doesn’t have a considerable amount of debt on its books and as it commented recently: “Our high-quality income is now well matched against longer-term fixed or hedged debt which provides further comfort to our ambition to grow our dividend.”
And under its classification as a real estate investment trust (REIT) it is obliged to redistribute at least 90% of its profits as dividends. Thanks to its bright bottom-line outlook — earnings are expected to rise 12% this year and by a further 7% in 2019 alone — it looks as if Tritax should keep growing shareholder payouts too.
Big and beautiful
As chief executive Richard Jewson commented on the release of half-year results last week: “[Tritax] has an exceptional portfolio and is well positioned to take advantage of the changing dynamics in the logistics market, in particular technical innovation in the form of e-commerce. This is affecting fortunes on the high street with a number of well-publicised retailers having succumbed to a challenging trading environment.”
In the six months to June, Tritax saw profit before tax boom by 33% year-on-year to £107.1m. With surging business rates and the changing way that we shop smacking the profitability of traditional bricks-and-mortar retailers, the need for such companies to beef up their online operations is paramount. And providers of so-called big boxes are well placed to profit from this.
At current share prices, Tritax carries a forward P/E ratio of 21 times. Sure, this might be expensive on paper. But in my opinion the firm’s exceptional structural opportunities and ambitious, M&A-led, growth strategy makes it worthy of this premium rating.
SThree (LSE: STHR) is another top FTSE 250 income hero which might be a better fit for classic value hunters, the stock boasting a forward P/E ratio of just 12.3 times.
I can’t see why the recruitment play is dealing at such cheap prices given the titanic progress that it is making across the globe. Latest financials showed adjusted pre-tax profit up 6% during December-May as revenues boomed 12%, driven by a fine performance in its core Continental Europe arm where gross profits jumped 18% in the six months.
And City analysts are expecting business to pick up momentum, meaning the anticipated 8% earnings rise for the 12 months to November 2018 is predicted to rise to 16% in fiscal 2019.
This improving outlook also means that, although the dividend is expected to be held at 14p per share this year, a lift is likely in the offing for next year. Or so say the experts, a 14.8p reward currently being bandied around. This means that yields of 4.1% and 4.3% are on the table for fiscal 2018 and 2019 respectively. I am convinced that SThree, like Tritax Big Box, could provide you with an income for life.
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Royston Wild 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.