The FTSE 250 real estate investment trust (REIT) Tritax Big Box (LSE: BBOX) has seen an over 100% increase since the stock market crash last year.
After the stock market rally of last November, this may look like no big deal. After all, many shares’ prices have gone back up to pre-pandemic levels.
A financially strong FTSE 250 stock
Except that in this case, it may in fact be a big deal. The BBOX share price did not suddenly rise in the vaccine discovery euphoria. It is actually doing quite well.
As per full-year results for 2020 released yesterday, the warehouser saw a 20% increase in operating profits. Government support has aided the housing market, but property companies have still been dented by the pandemic.
Bright prospects
BBOX has managed strong performance nevertheless, because of its niche in logistics. This has been in high demand because of the e-commerce boom. As a firm believer in e-commerce’s potential, I see this alone as reason for me to buy the stock. But there are others too.
The company has a positive outlook for 2021 and believes that long-term structural drivers are favourable for it. Growth pickup this year should be positive for consumer demand. There could be greater stability in property markets post-Brexit as well.
Despite all that is in its favour, BBOX’s earnings ratio is at around 18 times. It is not low but it is not anywhere close to the highest either.
The downside
The one disappointment that I think could put off investors is its dividends. BBOX reduced the dividend amount last year given the Covid-19 uncertainty, but it has not increased it despite a great set of results for 2020 and a positive outlook as well.
An alternate FTSE 250 stock
Companies with far less certainty have done so. One example is the FTSE 250 landscaping products’ provider, Marshalls (LSE: MSLH).
Even though it has reported a decline in both revenue and profits for 2020, it has managed to reinstate its dividend, albeit by a small amount. As per my estimates, its dividend yield is at around 0.6% at present.
This is possibly based on its positive performance in 2021 so far and its outlook. It reports a 7% increase in sales and 12% increase in order up to February compared to the same time last year.
Investors have clearly given Marshalls’s earnings a thumbs-up. It was a big index gainer as its results were released.
Risks to MSLH
There is much to like about the stock. It has seen a 45% increase after last year’s lows, but the one challenge here is that its earnings ratio is pretty steep at over 100 times.
Property markets are still policy dependent. An untoward change in either appears unlikely, but we have to bear risks in mind when investing. At its current share price levels, MSLH can be particularly vulnerable to any adverse developments.
Conclusion
I like both stocks, but BBOX appears to be the most attractive from a long-term perspective. MSLH has a strong case for it too, and in any case, I have already bought the FTSE 250 stock.
