Unite Group (LSE: UTG) is one of those shares that could make you a fortune before you retire, I believe. It’s not just that booming student numbers are driving demand for the FTSE 250 firm’s accommodation. It’s that the business remains committed to expansion to latch on to these massive structural opportunities.
Just today Unite announced exciting news on its expansion programme. The FTSE 250 firm has received planning permission for a 416-bed development in the centre of Bristol. It describes the South-West hub as “one of the UK’s leading university cities” which “continues to see strong growth in student numbers.” The site will be up and running at the beginning of the 2021/22 academic year.
Portfolio values continue swelling
Housing demand from both homegrown and overseas students continues to rip higher and yet there remains a huge shortfall in the number of available homesteads.
It’s why Unite’s property portfolio — which comprises more than 30,000 beds in developments across 22 British university towns and cities — is now worth £2.85bn, according to financials released earlier this month. This represents a yearly like-for-like increase of 3.1%, driven by strong rent growth, as well as yield compression in London.
This shortage of beds means that there’s already a rush by students to secure accommodation. Unite has seen more than two-thirds of its rooms booked for 2020/21.
It’s quite probable that the firm will release a sunny full-year update on February 26 too. Its share price has ballooned 160% over the past five years and there’s clearly room for more movement, possibly as soon as next month’s release.
Dividends up 500%+!
Unite doesn’t come cheap. For 2020 it trades on a forward price-to-earnings (P/E ratio) of 28.7 times, some distance above the widely-regarded value benchmark of 15 times. City growth forecasts illustrate quite why it’s so well regarded by market-makers though.
This year, the firm’s expected to record a 20% annual earnings rise, keeping its long record of yearly profits expansion rolling. The bottom line will rise 14% in 2021 too, forecasts suggest. The possibility of more strong and sustained earnings expansion isn’t the only reason why Unite excites me though: dividends at the business also continue to rocket.
Soaring profits in recent years mean that annual payouts have exploded 504% during the five years to 2018. City analysts are forecasting another big rise in 2019 to 31.7p per share from 29p in the prior period.
And expectations of a return to double-digit earnings growth in 2020 lead to expectations of spectacular rises over the medium term. Sums of 38p and 43p per share for this year and next are anticipated, resulting in inflation-beating 2.9% and 3.3% yields. There are bigger yielders out there, sure. But few of these firms’ long-term outlooks are as exceptional as that of Unite. I reckon this is a FTSE 250 growth and income hero to buy today and hold forever.
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Royston Wild 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.