IG Group

Online trading platform IG Group (LSE: IGG) has been a huge beneficiary of the recent volatility seen in global stock markets. Since hitting a low of 563p back in March 2020, its share price has climbed 54% as traders have sought to capitalise on the big swing in sentiment.

After such a strong run, it’s rational to question whether this momentum will last for much longer. Even so, I believe the dividends on offer make IGG worthy of attention. 

The FTSE 250-listed company is likely to confirm a full-year dividend of 43.2p per share when it reports full-year results next month. At today’s share price, that gives a yield of 5% exactly. While investing in IG naturally involves more risk, that’s a world away from the paltry interest rate offered by even the best instant access Cash ISA.

On top of this, strong free cash flow also gives me hope that, after a few years of being cautiously maintained, investors could see payouts increase from here.

Central Asia Metals

Another company offering a 5% yield is copper miner Central Asia Metals (LSE: CAML). Like IG Group, the mid-cap has done well for investors over the last year. In fact, anyone who picked up the stock in June 2020 would now be sitting on a gain of around 80%! 

Of course, investing in the commodity markets isn’t for ‘widows or orphans’. The rise and fall of the gold price last year is one example of this. With this in mind, I wouldn’t hesitate to spread my money around other British dividend stocks in a variety of sectors. Having a suitably diversified income portfolio would allow me to sleep at night.

On a positive note, I see CAML’s payouts are likely to be covered more than twice by profits. This makes it very unlikely (but, naturally, not impossible) that those invested won’t receive their prized dividends. Couple this with the expected huge demand for the red metal over the next decade and I suspect CAML will be worth tucking away for a while. 

Target Healthcare

A final British dividend stock offering a chunky income stream is Target Healthcare (LSE: THRL). This real estate investment trust (REIT) owns a growing portfolio of care UK homes. 

Right now, the consensus among analysts is that the company will return 6.71p per share for FY21. That becomes a yield of 5.8% at the current share price.

As tempting as that dividend stream is, it’s important to remember that even the most predictable businesses can encounter crises. I probably don’t need to remind you of the awful impact of the coronavirus pandemic on Target’s industry last year.

Nevertheless, I think the investment case remains solid. Back in 2018, it was estimated that the number of people over 85 in the UK requiring care would double within 20 years. This should lead to higher demand for homes like those owned by Target. Such a development might prove even more lucrative if it’s able to capture a greater share of this fragmented market in the meantime.

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Paul Summers owns shares of IG Group Holdings. 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.

The same case can be made for Tritax’s smaller rival Urban Logistics REIT (LSE: SHED) too. The AIM-quoted company enjoyed record take-up of its space in the 12 months to March, beating the prior all-time high printed just a year earlier. And rental income almost doubled in the period, reflecting that aforementioned demand surge as well as a chronic shortage of so-called big box facilities in the UK.

Annual dividends at Urban Logistics swelled 12% last year, and more meaty growth is anticipated for fiscal 2020, meaning a chunky 5.8% yield. And it’s not hard to foresee chubby payout hikes long into the future as profits likely go from strength to strength.

Prime target

Target Healthcare REIT (LSE: THRL) is another big-yielding property share I’d happily stash in my ISA today and hold there for years to come.

This business provides care homes the length and breadth of the country, and because of steady growth in the UK’s elderly population, I’m tipping earnings here to keep flourishing as well. Predictions from the Office for National Statistics suggests the number of citizens aged 85 years or over is set to balloon to 3.6m by 2019, up from 1.5m five years ago, certainly bolsters my confidence.

What’s more, Target has both the appetite and financial strength to remain active on the acquisition front to capitalise on this vast structural opportunity. In the last few months alone it’s shelled out close to £15m on a couple of care homes in Nottingham and Merseyside.

Its very bright growth outlook means City brokers predict more dividend hikes at Target in the near-term, leaving another mighty 5.8% yield for the current year (to June 2020). Buy it today for handsome income flows for years to come, I say.

Be bowled over

The renaissance of ten-pin bowling in the UK makes Ten  Entertainment Group (LSE: TEG) another dividend great to buy today.

It doesn’t matter that Britons’ spending power is coming under sustained pressure. A night out at the bowling alley is a relatively cheap, fun and unique experience, and this is why people are still flocking to their nearest venue in record numbers. This was evident in Ten Entertainment’s interims this month in which it advised of a 7.4% uplift in like-for-like sales in the period to June.

And just as we are seeing at Target, Ten Entertainment is putting its robust balance sheet at work to build future growth, the small-cap adding new centres in Southport and Falkirk to its estate portfolio in recent months.

Right now, the bowling behemoth carries a large 5% dividend yield for 2019 and a dirt-cheap corresponding P/E ratio of 11.7 times. I consider it to be a white-hot buy for ISA investors at the current share price.

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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.

If you’re looking for a blend of growth, income, and value then Ten Entertainment Group (LSE: TEG) is a share worthy of investment cash, in my opinion.

The popularity of ten-pin bowling with Millennials has prompted a renaissance of alleys the length and breadth of the country. It’s a relatively-inexpensive night out, meaning despite the broader pressure on Britons’ spending power, sales at Ten Entertainment are swelling (like-for-like sales were up 5.1% in the first 11 weeks of 2019).

And Ten Entertainment is harnessing this momentum by investing heavily in its existing estate and opening new arenas. Just this month, it completed the purchase of a site in Southport, Merseyside, taking the number of centres on its books to 44.

It’s not a surprise to see City analysts predicting earnings growth of 26% in 2019, a figure which leaves it dealing on a forward P/E ratio of just 11.3 times, and leads to predictions of more dividend growth. Ten Entertainment thus yields 5.2% and sits as a true income star.

Swot up

Empiric Student Property (LSE: ESP) is another share in great shape to deliver terrific profits rises in the near term and beyond. The student accommodation provider’s share price has plunged in recent months, leaving it dealing on a rock-bottom, sub-1 forward PEG ratio of 0.5, as concerns over how and when the UK exits the European Union have grown.

As of right now, though, Empiric is yet to see any impact of this on its operations. The business commented last month that “while there are economic and political uncertainties, particularly regarding Brexit, we are yet to see any material adverse consequences.”

British universities remain hugely popular with students from all over the world and are likely to continue to be so. It’s why revenues at Empiric soared 25% in 2018 and occupancy rates rose four percentage points to 96%.

Pre-tax profits almost doubled at the firm last year and City brokers are forecasting more terrific progress in 2019, a bottom-line rise of 42% currently anticipated. This bubbly estimate supports forecasts of more chubby dividends, leaving Empiric with a corresponding yield of 5.3%.

On target

My last selection is Target Healthcare Reit Ltd (LSE: THRL), a company whose yield of 5.8% for the upcoming fiscal year (beginning July 2019) makes it the best payer on this list.

City analysts expect the care home operator to generate earnings growth of 17% for the new period and, due to the UK’s rapidly-ageing population, there’s plenty of reason to expect profits to keep barrelling higher, in my opinion.

Like Ten Entertainment, Target is also committed to rampant expansion. In the first quarter alone, it opened new homes in Oxfordshire and Leicestershire. It currently has 23 tenants and expects this to rise to 26 once planned acquisitions and developments are completed.

At current prices, Target can be picked up on a forward PEG reading bang on the bargain watermark of 1 times. For a business with such scintillating growth opportunities for the years ahead, I reckon this makes it a steal.

The post 3 mega-cheap dividend heroes with yields above 5%. Can I afford to ignore them? appeared first on The Motley Fool UK.

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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.

Equiniti Group (LSE: EQN) is actually a lot more than that, as my Foolish colleague Rupert Hargreaves recently explained, and the company has been the subject of merger speculation which adds potential volatility to the share price.

But Wednesday’s news is very much pension-based as the company has just landed “pension administration contracts for the UK Atomic Energy Authority and for the Combined Nuclear Pension Plan.” The deal covers almost everyone working in the UK nuclear industry, reaching around 60,000 current members. I feel that this boosts confidence in Equiniti’s abilities.

Gyrating shares

A look at the price chart reinforces the erratic nature of Equiniti shares of late. Though they’re up 45% over the past five years to 215p, we’re still seeing significantly lower prices than the peaks of above 300p reached in 2017 and earlier this year.

That’s possibly related to the 1% fall in EPS forecast for the current year, but I see Equiniti as undervalued and the price fall as a buying opportunity. The forward P/E comes in at only around 12.5 for the current year, and predicted 12% earnings growth in 2019 would drop that to 11.

This month’s price weakness suggests the market might be drawing back from the takeover speculation, but I’d never buy a share on such rumours anyway — they often don’t happen, and you can easily lose a chunk of cash.

But in its own right I think Equiniti is a well-priced long-term buy right now, and if there’s a takeover boost, then that could simply be a bonus.

Health properties

My second pick for today is Target Healthcare (LSE: THRL). You might not be too keen on a real estate investment trust with the jittery sentiment surrounding the property market right now, but Target is in the business of operating specialist, purpose-built UK care homes.

Turning to fellow Fool Rupert again, he has already highlighted the long-term nature of Target’s lease deals, and I think that lends strong support to the reliability of its dividend prospects.

The share price itself has only just about matched the FTSE 100 over the past five years, but dividend yields between 5% and 6% make the overall performance of the stock look impressive to me. There’s a yield of 5.7% indicated for the current year.

A net asset value of 106p at 30 September puts the 112p shares on a slight premium, and that also suggests confidence in the dividend to me.

New capital

Investment trusts take on new investment cash through new rights issues, and on Wednesday Target announced a £40m placing at 109p per share.

Chairman Malcolm Naish said the firm has “identified a strong short-term pipeline of assets that meet our strict investment criteria and which are either imminent or in advanced negotiations for acquisition,” additionally pointing out that an enlarged share capital should reduce costs per share.

I like investment trusts as long-term retirement investments anyway, and I see Target as being in a defensive market with demand for its properties likely to rise.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK owns shares of Equiniti. 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.

However, even with the FTSE 100 trading close to an all-time high, there appear to be two investment trusts which could offer a balanced investment outlook. As such, they could be worth buying right now for the long run.

Impressive outlook

Reporting on Wednesday was specialist investor in UK care homes, Target Healthcare (LSE: THRL). The real estate investment trust (REIT) reported a rise in net asset value per share of 1.3p in the year to 30 June 2017. During the year, it completed eight transactions as well as a further two transactions after the end of the financial year. This takes the company to near full investment, which means its balance sheet may be better able to support its long term growth objectives. Greater scale allowed an increase of debt facilities, which could help to maximise its overall returns.

Dividends per share increased by 1.6%, which puts the trust on a dividend yield of 5.4%. There could be greater scope to increase shareholder payouts over the medium term, with the company’s earnings per share forecast to rise by 26% in the current financial year.

Trading on a price-to-book (P/B) ratio of 1.15, Target Healthcare appears to offer a modest valuation given its outlook. The company could prove to be a relatively stable income investment which helps its investors to generate high total returns through a mix of capital growth and dividends.

Growth potential

Also offering income potential is self-storage specialist, Safestore (LSE: SAFE). The REIT is expected to deliver a rise in its bottom line of 15% in the next financial year, and this could allow it to pay a higher dividend.

Currently, it has a dividend yield of 3% which is covered 1.7 times by profit. This suggests that there is scope for shareholder payouts to increase at a faster pace than profit over the medium term. This could help investors to beat inflation, which already stands at 2.9% and is forecast to move higher in the coming months.

Looking ahead, Safestore could also post high capital gains. It trades on a price-to-earnings growth (PEG) ratio of just 1.1, which suggests that it offers excellent value for money. That’s especially the case since the self-storage sector may prove to be relatively defensive if the UK macroeconomic outlook deteriorates.

Therefore, Safestore could have a potent mix of growth, value and income appeal. And with its share price having risen 16% in the last six months, investor sentiment appears to be positive. This momentum could benefit its near term performance.

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Peter Stephens has no position in any 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.

However the economic consensus indicates that inflation should pick up more sharply in the coming months. Consumers, for the most part, haven’t felt the impact of the falling value of the pound, because most major retailers have hedged their foreign currency needs, while many others have absorbed higher import prices. This can’t last forever though, and businesses that have already had to implement the national living wage earlier this year may struggle to absorb further cost pressures.

Below are three stocks that should protect your portfolio against rising inflation.

RPI protected dividends

Water utilities offer good protection against inflation because wholesale revenues are indexed to inflation each year. As regulated monopolies, regulators set prices to allow water companies to earn a specified return over the costs of running services and on the capital that companies have to invest in their infrastructure. If these costs rise due to inflation, water companies are allowed to pass on higher water charges to consumers, enabling investors to earn a steady return.

In this sector, United Utilities (LSE: UU) stands out because of its relatively cheaper valuation and higher yield. The stock currently yields 3.9%, with the company maintaining a policy of targeting annual dividend growth of at least RPI inflation through to 2020.

On the downside, higher inflation could prompt the Bank of England to raise interest rates. As water companies tend to have relatively high levels of leverage, higher borrowing costs could have a significant impact, lowering profits. Right now though, that prospect seems unlikely given the Bank of England’s loose monetary policy stance.

Natural hedge

Property is a natural hedge against inflation. That’s because, as property is a ‘real’ asset, investors have the ability to renegotiate rents during periods of unexpected increases in inflation.

Following Brexit, UK commercial property values have taken a hit, but that doesn’t mean investors should avoid the sector entirely. Target Healthcare REIT‘s (LSE: THRL) focus on healthcare properties adds defensive characteristics to an otherwise cyclical investment. The REIT benefits from secure long-term rental leases, with a weighted-average unexpired lease term of 29.2 years. In addition, a majority of its leases benefit from upwards-only RPI-linked annual rental increases.

The stock currently yields 5.6%, and trades at a 10% premium to NAV.

Strong pricing power

Although Diageo’s (LSE: DGE) revenues don’t directly rise with inflation like the other two stocks on the list, the company’s wide economic moat and pricing power help to protect margins against inflationary pressures. Diageo’s 27.1% organic operating margin reflects the value of its intangible assets, which lies at the heart of the company’s share price performance over the past decade.

Moreover, thanks to its massive collection of Scotch whisky brands, the drinks giant’s large UK cost base means it’s set to benefit from the cheaper pound. Analysts have been busy upgrading their estimates for earnings in 2016 and 2017 over recent weeks and now value the company at a forward P/E of 21.5 for this year and 19.6 for the next one.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended Diageo. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Investors still looking for dividends may find better value in other sectors, including utilities, financials and healthcare REITs.

Utilities

The ‘lower for longer’ interest rates outlook helps utility companies in two key ways. Firstly, lower rates reduce their financing costs. And as utilities tend to carry high debt loads, this has a significant impact on boosting profits. Secondly, lower rates cause income-oriented investors to gravitate to utility stocks, as their higher dividend yields become relatively more attractive when bond yields fall.

One stock that stands out in terms of its dividend yield and consistent performance is energy supplier SSE (LSE: SSE). The company has 14 years of consecutive dividend increases under its belt, so investors should be confident that the dividend payout is one of management’s top priorities. With a forward P/E ratio of 13.3 and a dividend yield of 5.5%, the stock is keenly priced, and is one to invest in if you’re looking for a reasonably-priced income stock.

Investors looking for a safer pick in the sector could consider water and waste management company Pennon Group (LSE: PNN). Shares in the company currently yield 3.7%, and trade at a forward P/E of 23. Although Pennon offers less in terms of yield and value, the utility company has less exposure to volatile commodity prices and invariably generates a steady return year after year.

Financials

Although low interest rates reduce the income financial companies can earn from their fixed-income investments, Prudential (LSE: PRU) and Old Mutual (LSE: OML) are set to offset much of this impact to earnings from their large exposures to the US and emerging markets.

Thanks to the 12% fall in the pound against the dollar since the Brexit vote, their foreign earnings are now worth much more in sterling terms. This improved sterling earnings translation will offer a much needed boost to their short-term earnings as margins shrink, and will compress their already low forward P/E ratios.

Shares in Prudential trade at a forward P/E of 10.9 and currently yield 2.9%. South Africa-focused Old Mutual offers a much more attractive yield of 4.4%, but trades at a slightly more expensive forward P/E of 11.5.

Property

Recent large-scale outflows from commercial property funds may put off investors from buying property assets, but there’s one sector that has remained largely immune: healthcare properties.

An easy way to gain access to the sector is to buy a healthcare REIT, such as Target Healthcare REIT (LSE: THRL). In stark contrast to commercial REITs, where most trusts trade at a sizeable discount to their net asset values, shares in Target Healthcare currently trade at a 12% premium to NAV.

While a slowdown in the commercial property sector would undoubtedly have knock-on effects on the rest of the property market, Target Healthcare’s long lease terms (average unexpired term of 29.5 years) and annual rental uplifts offer it significant protection against a potential downturn.

Shares in the REIT currently yield 5.4%.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

But are these fears overblown, and is it a good time to be greedy when others are fearful? After all, bookmakers still believe the odds of Britain remaining in the EU is well over 70%. What’s more, underlying long term fundamentals are supportive too. There remains a chronic shortage of high quality space available for businesses, while the “lower for longer” outlook on interest rates should keep rental yields low and property prices buoyant.

Growing dividends

Shares in Land Securities (LSE: LAND) currently trade at an 18% discount to net asset value (NAV), despite the REIT having one of the most attractive development pipelines. With additional rental income coming in from the completion of new office and retail developments, earnings are forecast to grow 6% this year, with a further 8% pencilled in for 2017.

Since 2012, Land Securities has increased its dividend more than 20%, and I think there is more growth to come. The REIT currently yields 2.8% today, and is projected to grow its dividend by 5% in 2016. A similar amount of dividend growth should follow in the following year, giving investors a prospective dividend yield of 3.4% by the end of 2017.

Retail exposure

intu Properties (LSE: INTU), a shopping centre REIT, trades at an even steeper discount to its NAV, of 24%. But being more heavily exposed to the retail sector, intu is arguably at a lower risk from a potential Brexit. That’s because most economists don’t expect an immediate shock to consumer spending in the event of Brexit, meaning retail rents and vacancy rates should remain stable in the immediate aftermath of the EU referendum.

Shares in intu currently yield 4.7%, and city analysts are forecasting a 1% increase in its dividend this year.

Non-cyclical

Target Healthcare REIT (LSE: THRL) should keep profiting from steady growth in healthcare needs. Healthcare demand is non-cyclical, and the need for purpose-built care homes is ever-increasing, given the rapidly ageing population.

As is typical of the sector, Target Healthcare benefits from long-term full repairing and insuring leases, which include upwards-only annual rental increases. This allows the REIT to generate very predictable cash flows year after year, which enables it to pay shareholders almost all of its earnings through dividends.

Since its IPO in 2013, Target Healthcare has delivered a total return of 17%, with its shares currently yielding 5.8%.

Better yield, but higher fees

Like Target Healthcare, MedicX Fund (LSE: MXF) invests in the healthcare sector. The fund currently pays a quarterly dividend of 1.475p per share, with underlying dividend cover of 63.0%. At today’s share price of 84p, the fund currently yields 7.0%.

Although MedicX has a more attractive yield than Target Healthcare, there is a downside. MedicX charges higher management fees — its 2015 ongoing charge, which includes a 15% performance fee on total shareholder returns above 8%, was 2.83%, compared to 2.01% for Target Healthcare, according to data from the Association of Investment Companies (AIC).

Massive 7.7% yield

Finally, U and I Group (LSE: UAI) seeks to make property investments that have the potential to gemerate strong financial returns as well as long-lasting social and economic change for local communities. The REIT focuses on regenerating city centre properties and investing in higher yielding warehouse development opportunities in the British regions.

Including the 8p per share yearly special dividend, U and I Group currently yields a massive 7.7%. Its dividend is comfortably supported by an 81% payout ratio, well below the 90% level which is usually considered to be an acceptable maximum for REITs.

Trading at a 38% discount to NAV, value investors should keep an eye on this REIT.

The post 5 REITs with yields up to 7.5%: Land Securities Group plc, Intu Properties plc, Target Healthcare REIT Ltd, Medicx Fund Ltd. & U and I Group plc appeared first on The Motley Fool UK.

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Jack Tang has a position in Land Securities Group plc. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.