With that being the case, I think property stocks are now a much better investment than buy-to-let property and today I’m going to highlight two property stocks that I believe can help you make a million.

Deep value

The first company is Inland Homes (LSE: INL). This immediately looks to me as if it is a deep value investment. It is trading at only 85% of book value, a forward P/E ratio of 7.2 and it supports a dividend yield of 4.3%.

It’s not immediately clear why the market is giving this business such a wide berth. Over the past six years, net profit has risen by more than 300% as the property development, and regeneration specialist has benefited from the UK’s booming property market. Over the same time frame, Inland’s dividend to shareholders has increased tenfold, and it looks as if management can improve the payout further. It is covered three times by earnings per share.

Undervalued 

The figures above tell me Inland could be a much better investment then buy-to-let. For a start, the stock is undervalued by around 50% compared to the rest of the UK real estate sector, which trades at a forward earnings multiple of approximately 16. On top of this, earnings per share increased at around 30% per annum for the past five years, while this rate of growth is clearly unsustainable over the long term, analysts have pencilled in high single-digit earnings growth for the next two years.

This growth, coupled with the group’s 4.3% dividend yield, implies the stock could return around 10% per annum for the foreseeable future, that’s without including an increase in valuation to the sector average.

An investment of £100,000, roughly the same amount as a deposit required on a buy-to-let property, would grow into £1m after 25 years with a return of 10% per annum.

Capital property 

Another property company that I think and help you make a million is Helical Bar (LSE: HLCL). 

Helical is focused on the ownership and development of property mainly in and around London, and its track record of creating value for shareholders is impressive. For example, since 2013 book value per share has increased by 16% per annum. 

Unfortunately, the stock is currently trading at a discount to book value of around 27%, so this value creation is not entirely reflected in the stock today. Still, if the company continues to do what it has done in the past, I think it is highly likely that over the long term, the shares will trend towards the current book value of 463p and possibly higher as the firm continues to create value for shareholders. 

And as the company’s property portfolio is located in and around London, I think there’s a high chance an opportunistic buyout offer could be tabled for the group. 

On top of the deeply discounted valuation, the stock also supports a dividend yield of 3.1%, which implies shareholders could see an average annual return of 19% on their money through a combination of book value growth and dividends.

The post Forget buy-to-let. I think these property stocks can help you make a million appeared first on The Motley Fool UK.

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

Dividend roadmap 

Homebuilder Persimmon (LSE: PSN) is well known for rewarding shareholders with chunky dividend payouts. Since 2013, the company has returned a staggering 720p per share to investors, that’s 29% of its current share price.

And the company isn’t planning to disrupt this track record any time soon. Management is looking to return another 580p per share to investors by mid-2021, taking the total cash return from 2013 to 1,300p per share.

Starting from these figures, shares in Persimmon should yield 9.6% in 2019, and the same amount in 2020 based on today’s share price.

What attracts me to Persimmon over other dividend stocks is management’s dividend roadmap for the next few years. The group initially committed to returning £1.9bn or 620p per share of surplus capital to shareholders between 2012-2021, and so far, not only has the company made good on this promise, but it has also surpassed expectations.

The question is, could there be a risk that, having increased its long-term cash return target, will Persimmon be forced to back-pedal if the housing market turns against it?

Is the payout sustainable? 

I believe the chances of this are low. Persimmon is well capitalised and the company is riding high on the booming UK housing market. True, some cracks are starting to show at the upper end of the property market, particularly around London. But Persimmon’s core business of producing relatively affordable homes, below the average selling price of £242,000, is holding up well, supported by the government’s Help to Buy scheme.

What’s more, Persimmon’s forward sales pipeline (£2.1bn at the end of the first half of 2018) gives management plenty of clarity on how the business is going to perform over the next few years. 

Coupled with the group’s near-£1bn net cash balance, this gives me confidence that the housebuilder won’t be forced to go back on plans to return capital over the next two years. In fact, I believe the company could increase its capital return target once again, although not everyone agrees with this view. 

Affordable housing

If you already own Persimmon, another builder that might be worth your consideration is Inland Homes (LSE: INL).

Inland does not quite have the same dividend record as Persimmon, but the firm is working flat out to improve its presence in the UK property market.

Last month, the enterprise announced that it is diversifying into the private rented sector and had submitted its largest ever planning application at a 30-acre site in Cheshunt. Today, the business has issued further good news, announcing that it has registered as a provider of social housing, following a two-year qualification period.

All of these changes are part of the company’s efforts to diversify its revenue streams, becoming an affordable housing champion in the South of England.

With affordable housing high on the agenda for the government, Inland’s focus on this section of the market is notable. Trading at only 7.8 times forward earnings, I believe this is an exciting play on the most robust segment of the UK housing market.

The post Can you afford to ignore this FTSE 100 income champion’s 9% yield? appeared first on The Motley Fool UK.

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

According to the update from the homebuilder, the shortage of homes in the capital has allowed it to shrug off any market uncertainty during the first half of its financial year. The firm focuses on affordable “non-prime” areas of London and is working with institutional landlords such as M&G Real Estate and Greystar to help them build out their “build to rent” portfolio. 

However, even though trading is robust, management believes that due to the timing of home sales, pre-tax profits for the six months to September 30 are likely to be lower than last year. Still, management stresses that this fall in profitability is “purely down to development timings which are all on track.” 

A cheap buy 

For the full-year, the company believes that it is on track to meet market expectations for full-year profits of more than £40m. Based on this forecast, shares in Telford are currently trading at a forward P/E of 8.5, which seems execptionally cheap compared to the company’s steady growth and bright outlook. 

Thanks to rising London home prices, and the government’s help-to-buy scheme, Telford’s earnings per share have jumped threefold in the past five years, and analysts are predicting growth of 29% for this year, and 18% for the year to 31 March 2019. Not only are shares in the homebuilder dirty cheap, but they also support an attractive dividend yield of 4.2%. 

Room for dividend growth 

The payout is covered more than twice by earnings per share, so there’s plenty of room for further payout growth, and a wide margin of safety if earnings fall. Based on City estimates, for the fiscal year ending 31 March 2019, Telford is trading at a forward P/E of 7.2, around 40% below the sector average multiple of 10.3. According to my calculations, if the shares can command a sector average multiple, including dividends, over the next two years Telford’s shareholders could see a return of more than 50%.

Trading below book value

Inland Homes (LSE: INL) is another dirt-cheap homebuilder with the possibility for substantial gains. The shares trade at a forward P/E of 8.3, which is 24% below the sector average and the shares also trade at a deep discount to the company’s net asset value. 

According to the firm’s preliminary results for the year ended 30 June 2017, the reported net asset value at the end of the period was 92p per share, approximately 40% above the price the shares are trading hands at today. 

Inland’s shares only support a dividend yield of 2.9% at present, but the payout is covered 4.4 times by earnings per share. What’s more, the firm is returning cash to investors via a share buyback. 

Management recently announced that the company would buy back 1m of its shares. This is a savvy move as the company is only paying 67p in the £1 for these shares. In my opinion, this is a much more efficient method of returning cash to investors as there’s no double taxation and Inland is not wasting money on unneeded acquisitions. If the shares rise to net asset value, the upside here could be 40% or more. 

The post These 2 small-cap growth and income stocks could still make you brilliantly rich appeared first on The Motley Fool UK.

More reading

• 5 years ago £10k bought 4,484 Tesco shares. How many would it buy today?
• 3,703 Legal & General shares pay £822 yearly passive income
• 5 years ago, £10,000 bought 9,827 Rolls-Royce shares. But how many would it buy now?
• No savings at 30? How investing £5 a day in an ISA could target a stunning second income of £40,208 a year
• Here’s how much an investor needs in Lloyds shares to earn a £125 monthly income

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