One solution for retirees wishing to supplement the (low) State Pension would be to buy shares in decent dividend-paying companies, particularly those whose earnings are sufficiently stable to survive political and economic setbacks. Put another way, I’m talking about boring but profitable businesses. Here are three great examples.
Self-storage firm Safestore (LSE: SAFE) has been a stonking investment for those who’ve bought and held on over the last few years. Our growing need for places to house our possessions has seen the shares climb 285% in value since September 2013.
There could be more to come. Highlights from the mid-cap’s Q3 update earlier this month included a 10.3% rise in group revenue and 5.6% rise in like-for-like revenue, both at constant exchange rates. Performance in the UK and in Paris was described as “strong” with Alligator — the company’s 12-store recent acquisition — trading in line with expectations.
And Brexit? CEO Frederic Vecchioli certainly doesn’t appear concerned, having stated that the company’s business model should allow it to “withstand any macroeconomic uncertainty that may arise over the coming months“.
On almost 20 times earnings, Safestore isn’t cheap, but this may still be a reasonable price to pay based on its growth strategy and all-round stability. It’s also not as expensive as main rival Big Yellow.
The company is forecast to return 17.1p per share in the next financial year (beginning November), which translates to a decent 3.2% yield at the current share price.
When it comes to searching for robust business models, waste manager Biffa (LSE: BIFF) also fits the bill nicely.
This month’s update from the firm was appropriately predictable. Trading in the first half of the financial year (six months to 28 September) had been in line with management expectations, with its Industrial & Commercial division continuing to generate “good organic and acquisitive revenue growth“.
Elsewhere, trading at its Resource Recovery & Treatment and Energy Divisions was adequate, although the bin-collecting Municipal division continues to be impacted “by cost inflation and local government spending cuts“.
Trading on 13 times forecast earnings, Biffa still looks fair value in my opinion. There’s a 2.7% dividend yield for this year with an 8% hike to the total payout predicted for 2019/20, all easily covered by profits.
The last pick would be Sirius Real Estate (LSE: SRE) which operates business parks in Germany. That might not be enough quicken your pulse, but it’s fair to say that recent trading has been anything but dull.
Earlier this month, the company announced news of three new lettings to a German sports car manufacturer, a division of the Berlin government and a global humanitarian charity (Care International). A “significant renewal” by existing tenant Daimler AG (owner of Mercedes-Benz) is also on the cards, with the latter looking to secure 40,000 sqm of space for an extra five years.
On a forecast price-to-earnings ratio (P/E) of a little under 18 for the current year, Sirius is — like Safestore — a little expensive. That said, this moves down to 15 in 2019/20 should analyst estimates on growth prove correct. Having now entered into exclusivity to buy another €60m of assets (following the €40m already spent), I wouldn’t bet against profits continuing to rise.
A chunky 5% dividend yield at the current share price is the icing on the cake.
Markets around the world are reeling from the coronavirus pandemic…
And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.
Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…
You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.
That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.
Paul Summers 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.