The Motley Fool

Forget the Sainsbury’s share price, I’d buy this FTSE 250 income stock

Image source: Getty Images

The last time I covered the J Sainsbury (LSE: SBRY) share price, I advised investors to turn their backs on the retailer following a dismal Christmas trading update.

I continue to hold this opinion. The company’s outlook hasn’t improved over the past few weeks, and it now looks very likely that Sainsbury’s proposed takeover of peer ASDA, will not get the green light from regulators without substantial changes.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Blocked deal? 

Earlier this month, the Competition and Markets Authority extended its investigation into the deal citing the “scope and complexity” of the investigation. The authority needs more time to digest and analyse the issues raised by competitors, as well as with the two key companies. 

If the deal isn’t approved, it’s difficult to see what the future holds for Sainsbury’s. It’s more than likely the company will continue to chug along at its current pace, which implies another year or more of lacklustre growth. At the same time, its domestic competitors, notably Tesco at Morrisons, are roaring ahead, grabbing market share from floundering Sainsbury’s. 

With such an uncertain outlook, I don’t think it’s worth paying the current price of 13.8 times forward earnings for the retailer’s shares.

Slow and steady income 

Sainsbury’s is not for me, but one company I’m interested in is Safestore Holdings (LSE: SAFE)

Safestore’s growth is exploding thanks to the UK’s insatiable demand for storing stuff. The company can’t build properties fast enough. It has 119 wholly-owned stores across the UK and 27 in Paris. On top of this, the group has three new sites in the UK under development and two new locations in the French capital, which are on schedule to open in 2019 and 2020.

Customers are filling up these storage facilities almost as fast as the group can build them. According to Safestore’s first quarter trading update for the three months to the end of January, the company increased its maximum lettable area by 1.6% year-on-year, and its closing occupancy rose 2.2% to 72.2%. 

These numbers indicate customers are opening new accounts with the group at a faster rate than it can build out new storage facilities. 

On a like-for-like basis, occupancy rose 3.2% to 37.5%, and the average storage rate increased by 2.4% to £26.44. Overall, like-for-like revenue expanded 6.4% year-on-year during the first fiscal quarter of its 2019 financial year. 

More of the same

With over two decades of operating history behind it, I’m confident that Safestore is pursuing the right growth strategy and, as the group continue to expand, shareholders should be well rewarded. 

The company has already increased its dividend by 160% over the past six years and analysts are expecting further growth of 13% for 2019, which gives a dividend yield of 3%. 

Another attractive quality about this business is earnings should be relatively immune to any economic disruption that comes as a result of Brexit. The company could even see an increase in demand for its services if things get really bad, because homeowners who have to sell their homes, and shop owners who are forced out of business, might need somewhere to store their possessions while the economy recovers. 

Considering all of the above, I think Safestore is an excellent income stock to include in your portfolio today.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Tesco. 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.

Where to invest £1,000 right now

Renowned stock-picker Mark Rogers and his select team of expert analysts at The Motley Fool UK have just revealed 6 "Best Buy" shares that they believe UK investors should consider buying NOW.

So if you’re looking for more top stock ideas to try and best position your portfolio in this market, then I have some good news for your today -- because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.