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2 property stocks I’d buy for my pension today

I have a few investment trusts on my pension shortlist, including real estate ones (REITs). I’ve spoken of a couple of my favourites before. I also think a REIT can be a good way of investing in property in a way that evens it out as a pooled investment.

Whatever the short-term outlook, I think the future will be healthy for the property market, and I also like a few brick & mortar construction stocks I think will do well.

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Here I’m looking at two property-related stocks, which have caught my attention for opposite reasons — one was in Thursday morning’s list of top risers, the other in the top fallers list.

Building materials supplier

I took a look at Grafton Group (LSE: GFTU) a couple of weeks ago, as one in the brick & mortar category. Although its recent earnings growth was expected to slow, I liked the look of it as a long-term defensive stock. Thursday’s third-quarter trading update included a profit warning, and talk of “softer third quarter trends which have continued into October” didn’t help the share price, which dropped 10% during the morning.

While the UK’s construction business is struggling with the uncertainties brought by a potentially traumatic Brexit, the firm now expects to miss its previous expectations by around 4% to 8%. That’s despite constant-currency revenue having grown by 3.6% in the nine months to 30 September, and by 3.1% on a like-for-like basis. But the downturn can be seen in Q3, which saw like-for-like revenues gain just 0.9%.

Assuming a 6% undershoot on forecast earnings, we’re now looking at a forward P/E of 13 after the share price dip. The predicted dividend would still be covered more then three times by reduced earnings, so I think that looks safe, and it would yield 2.4%. That’s not the biggest dividend in the market, but as it’s so well covered and progressive, I find it attractive.

I still rate Grafton as a buy, and the next year or two could be a good spell for topping up.

Small-cap REIT

The big riser is the Capital & Regional (LSE: CAL) real estate investment trust, whose shares jumped 20% on Thursday. The reason is simple. It’s a big investment in the firm by Growthpoint Properties, which has made an agreed partial offer for 30.3% of the existing share capital and will invest a further £77.9m in a new share issue. The result of the deal will see Growthpoint holding approximately 51.2% of the new enlarged share capital.

Prior to the price leap on the news, Capital & Regional shares were trading on a forecast P/E of only around five, which is super low. When that happens to a share that’s genuinely undervalued, a buyout offer is often the way it’s resolved. But it can also result in existing shareholders being forced to sell their shares at a price that, even if it’s at a premium, they might not consider attractive in the long term.

This partial offer can help solve that dilemma. In the words of the company, if offers shareholders “the opportunity to realise an attractive premium to the current share price… while affording them the opportunity to participate in the future value of a recapitalised Capital & Regional.”

I think shareholders should be pleased by the news.

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Alan Oscroft 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.