Working with the public sector

A good example is Civitas Social Housing (LSE:CSH). This business invests in social care housing and healthcare facilities around the UK.

The portfolio of 697 properties works with 178 local authorities and houses several thousand tenants. From the income derived from the property portfolio, it pays out a quarterly dividend to shareholders.

The current dividend yield is 9.75%. Part of the move higher in the yield over the past year has come from the decrease in the share price. A 34% fall certainly isn’t great, but it does reflect the sector-wide slump.

This fall relates not only to the property values in the REIT, but also higher future financing costs due to the increase in interest rates relative to a year ago.

Even with this risk, I’m confident of sustainable dividend income going forward. The main clients of the trust are housing associations and soon will include the NHS. When lease agreements are signed by the public sector, I feel they are unlikely to default. This makes it an appealing buy for investors in my opinion.

Diversified income streams

The second stock is the Alternative Income REIT (LSE:AIRE). Over the past year, the share price has dropped by 16%. The dividend yield stands at 8.38%.

I like the REIT because it does what the name says – finding alternative property-related income sources. This includes areas such as leisure, hotels, healthcare, education, logistics, and automotive. In practical terms, this ranges from a Premier Inn in Camberley to a Volvo showroom in Slough.

The fact that it spreads the risk of receiving lease and rental income over different sectors means it’s more diversified. This should reduce the risk of losing revenue if one area of the market struggles in coming years.

Investors do need to be careful about the market cap. It currently sits at £54m, which isn’t huge. The issue this can cause is a lack of trading liquidity. This can contribute to erratic moves in the share price, driven by relatively small buy or sell transactions.

Building into a robust portfolio

I feel both income stocks could add value to a dividend portfolio. I speak of it being a game-changer due to the high yields on offer. This can help to materially lift the average dividend yield of an existing portfolio. Yet if combined with several other existing stocks, it doesn’t have to significantly increase the risk overall.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

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Here are two stocks that I’ve got on my radar to consider buying.

Helping out the needy

First up is Civitas Social Housing (LSE:CSH). This is a real estate investment trust (REIT). The share price is down 40% over the past year, which is one factor pushing the dividend yield up to 10.89%.

The business is focused on investing in social housing projects in the UK. It has a portfolio of 697 properties, with over 4,500 tenants. It looks for opportunities in the newly constructed space, as well as renovated properties and existing properties that have been repurposed.

As a REIT, it has a mandate to pay out a set amount of profits as income (derived from rental payments). This gives me confidence that dividends in some form will always be paid.

The fall in the share price reflects concern around property market valuations over the past year. Further, the business will find it more expensive to take on more debt to purchase property going forward due to higher interest rates.

I accept the risk, but note the strong financials reported in the half-year update. I also like the ESG focus and benefit to society that the company advocates through social housing provisions.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. 

Investing in the future

The second company is Digital 9 Infrastructure (LSE:DGI9). The FTSE 250 firm only went public in 2021, but currently offers one of the highest yields in the index, at 9.10%. However, the share price has fallen 39% over the past year.

As the name suggests, the business invests in digital infrastructure projects. In practical terms, this means things like data centres and subsea fibre systems.

Given the way the world is going, digital continues rule and prosper. I can only see demand for these projects rising in the future, with Digital 9 well-placed to benefit from providing capital and reaping returns.

Of course, a concern is the steep fall in the share price. In the annual report, the business flagged up challenges including high inflation, high interest rates and the departure of key personnel in the investment team.

Yet with both high-yield stocks, the fall in the share price helps to elevate the yield. This goes back to the first sentence, that higher yield does mean higher risk.

Both stocks are on my watchlist for April. I do see myself buying the shares at some point. However, I’m going to see if they continue to fall in the next couple of weeks before making a decision… buy, or continue to watch and wait.

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Social housing

Civitas is a real estate investment trust that focuses on providing social housing throughout the UK. To provide further context, REITs are businesses set up specifically to provide returns to shareholders from income-yielding property. Some others I own focus on warehousing or industrial property, or retail and office spaces. I like these stocks because as a rule, they must return 90% of profits to investors.

Civitas shares are trading for 64p at time of writing. A year ago, the stock was trading for 84p, which is a 23% decline over a 12-month period. I’m not concerned by this share price drop as many UK shares have fallen due to recent economic volatility. It just means that the shares are cheaper for me to buy right now.

Why I decided to buy the shares

First things first, I believe Civitas will only continue growing as a business, due to the fact that demand for housing is outstripping supply here in the UK. House builders are looking to make the most of this. With this in mind, Civitas should be able to leverage this demand into new homes, and in turn, make more rental income. This should then result in more dividends for investors.

Looking at returns then, I think Civitas’ current dividend yield of over 8% is enticing. Comparing this level to the current FTSE 100 average of 3%-4% fills me with confidence. I am conscious that dividends are never guaranteed and can be cancelled at any time, however.

Next, due to Civitas shares falling, they look better value for money now too. They currently trade on a price-to-earnings ratio of 10. There is a general rule that a ratio of under 15 could represent value for money.

Finally, I can see Civitas has a good track record of performance in recent years. For example, it has grown revenue year on year for the past four years. I am conscious that past performance is not a guarantee of the future, however.

Risks and conclusion

Despite my decision to buy Civitas shares, I must be wary of issues that could hinder any passive income I hope to make. Due to current economic volatility, a cost-of-living crisis has emerged. With this in mind, rent collection may become tougher for Civitas. If this does happen, it could impact its balance sheet and level of returns. I believe this is a shorter-term issue, however.

Overall I’ve decided to add Civitas shares to my holdings due to the passive income opportunity, growing market, and share price, as well as the company’s track record to date. I will be adding the shares to my holdings imminently and expect them to boost my portfolio for the long term.

The post Here’s how this growth stock could boost my passive income! appeared first on The Motley Fool UK.

Social housing REIT

Civitas specialises in providing social housing for people across the UK. As a quick reminder around REITs, they are businesses set up specifically to provide consistent returns to shareholders through income-yielding property.

There are many different types out there which focus on different types of property such as social housing, office space, healthcare properties, and industrial properties to mention a few. One thing they all have in common is all REITs must return 90% of profits to shareholders. This is one of the biggest attractions for me as a passive income seeker.

So what’s happening with Civitas shares currently? Well, as I write, they’re trading for 82p. At this time last year, the stock was trading for 117p, which is a 29% decline over a 12-month period. Many stocks have pulled back in recent months due to macroeconomic and geopolitical factors.

Risks to note

It must be noted that dividends are never guaranteed. They can be cancelled at the discretion of the business at any time. An example of when this could occur for a REIT is poor performance, or alternatively a one-off extreme event such as a financial crash or pandemic.

One of the biggest risks REITs face is that of rent collection. If for any reason it cannot collect rent, it cannot provide returns to shareholders. The current cost-of-living crisis, which has been caused by macroeconomic headwinds in recent months, could play a part here.

The bull case

So to the positives then. As a passive income seeker, I instantly look for the dividend yield on offer. Civitas shares offer a yield of over 6% currently. This is higher than the FTSE 100 average of 3%-4%.

Next, performance underpins dividends, so what is Civitas’ track record recently? I am aware that past performance is not a guarantee of the future, but looking back, I can see revenue has increased year on year for the past four years.

Looking at the Civitas share price, the shares look decent value for money at current levels on a price-to-earnings ratio of just over 11. The general consensus is that a ratio of below 15 indicates value for money.

Finally, the current demand for housing in the UK outstripping supply is a major positive for me. A REIT like Civitas is in a prime position to grow its portfolio of properties and capitalise on increasing demand for years to come. Social housing is seen as one of the most stable parts of the property market.

Overall, I like the look of Civitas shares and would add them to my holdings to boost my passive income stream. I also expect demand for social housing to help boost its growth. This REIT will fit in nicely with the others in my portfolio.

The post Here’s 1 REIT to buy for dividends and growth! appeared first on The Motley Fool UK.

N Brown sells value clothing through brands such Jacamo and JD Williams. I’m confident this should serve the company well as shoppers try to stretch their shopping budgets. I think the retailer’s focus on the plus-size and older markets could pay off handsomely as well. These demographic groups are growing rapidly.

Finally, I believe N Brown’s decision to scrap its stores and focus solely on e-commerce might give revenues a significant boost as online shopping continues to rocket ever higher. I’d buy this cheap UK share even though rising raw material costs could put profit margins under fresh pressure.

Take a ride with this electric vehicle stock

The electric vehicle (EV) revolution provides plenty of potential for UK mining shares. Take Horizonte Minerals (LSE: HZM) as an example. This metals digger owns the Vermelho nickel and cobalt prospect in Brazil, from which it hopes to produce 24,000 tonnes of material over 38 years, once it’s operational.

Analysts at Macquarie predicted last month that nickel demand for EV production will rise by up to 20 times between now and 2030. Horizonte could be in one of the box seats to exploit this phenomenon.

Horizonte has made huge strides recently in getting its other major asset, the Araguaia ferronickel mine, off the ground too. In November, it sealed a $633m funding package (including a $197m rights issue) for the construction of the Brazilian mine. The project is now fully financed and maiden production is scheduled for two years from now.

Horizonte’s large-scale projects offer the business plenty of profits potential. But I’m aware that any hiccups with exploration or development at Araguaia or Vermelho could have a significant impact on shareholder returns.

A penny stock for property fans

Surging inflation also bodes well for property stocks in 2022. This is because property prices and rental income both tend to rise in this sort of environment. I’d buy Civitas Social Housing (LSE: CSH) as a result, though it wouldn’t be the only reason. Residential landlords like this could be some of the most robust property stocks next year as the UK economy cools.

Civitas might prove to be a great share to own from a longer-term perspective too. Britain has a colossal shortage of social housing which looks set to persist. This should keep rents at properties like this chugging nicely higher, irrespective of inflationary impacts.

One final thing. At current prices, Civitas Social Housing boasts a mighty 5.8% forward dividend yield. I’d buy this penny stock despite the threat that its growth strategy could stall if decent acquisition opportunities fail to appear.

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History reveals that the average long-term investor makes an average yearly return of 8%. This figure also takes in periods when stock markets are crashing. So why would I stop buying UK shares for my Stocks and Shares ISA? Snapping up stocks that have recently plummeted in value gives me the chance to supercharge the returns I could potentially make too.

2 penny stocks I’d buy right now

I think now could be a particularly good time to buy penny stocks as well. Clearly I need to be careful here as smaller-cap stocks (generally speaking) have less financial strength to withstand economic shocks than larger companies. But recent stock market sell-offs have seen top-quality and well-capitalised penny stocks sold off along with the more vulnerable.

Here are what I think are two of the best penny stocks to buy as stock markets slump. I’d happily spend £500 on each of them.

Jaw-dropping value

It’s no surprise that Coats Group (LSE: COA) has slumped in value recently. The threads, zips and trims manufacturer has fallen as concerns over runaway inflation have exploded. As well as threatening to push up costs, rocketing prices could deal consumer confidence a significant blow. As a consequence smacking sales volumes across the entire clothing market could sink.

It’s my opinion however, that Coats Group could now be too cheap to miss. The world’s biggest threads manufacturer now trades on a forward PEG ratio of just 0.2, well below the bargain-basement benchmark of 1. As a long-term investor, I’m excited by the potential profits this penny stock could generate as the global population expands and wealth levels in emerging markets soar. And don’t forget that the fast-fashion market is expected to keep growing rapidly too.

6.3% dividend yields!

I think Civitas Housing Group (LSE: CSH) could be one of the best penny stocks to buy, as concerns over the economic recovery grow. As the name suggests, this UK share specialises in providing accommodation, giving it exposure to one of the most stable areas of the property market. What’s more, the rents it receives are paid directly to tenants by local authorities, meaning it doesn’t have to worry about dangers like occupiers losing their jobs.

Today, Civitas trades on what I consider to be an undemanding forward P/E ratio of 16 times. Given those excellent defensive qualities, I think this makes the penny stock something of a bargain. What’s more, at current prices of 89p, the company carries an enormous 6.3% dividend yield.

I’d buy this UK share despite the fact that its acquisition-led growth strategy leaves it open to overpaying for an asset, or realising below-expected returns.

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UK share investors need to think carefully if they’re buying stocks for big near-term dividends. The recent rollout of a coronavirus vaccine provides a chink of light for 2021. But the fight against Covid-19 will remain tough during the first half of the year. It’s possible that new virus variants could derail a strong economic recovery later on too, and consequently a profits rebound for UK plc.

Why I’m still buying UK shares today!

Be careful then, but don’t stop investing entirely. That’s the strategy I’ve taken with respect to my Stocks and Shares ISA. Firstly, this is because I buy UK shares with a view to what shareholder returns I can expect to make over a long time horizon. I buy stocks with a view to owning them for a minimum of 10 years.

And secondly, I’ve kept buying UK shares because there’s plenty of stocks out there that’ll deliver BIG shareholder returns in 2021 regardless of the Covid-19 crisis or the state of the global economy. Here are two big-yielding shares on my ISA watchlist today:

#1: Civitas Social Housing

Care home operator Civitas Social Housing (LSE: CSH) is one of the most secure stocks out there for 2021. Rents are paid directly to its tenants by local authorities, insulating the company from weakness in the broader domestic economy. It also has a rock-solid balance sheet with scope to raise further financing. That gives it the firepower to build its acquisition pipeline and keep its progressive dividend policy rolling.

Its ultra-defensive operations mean City analysts reckon earnings will keep growing by double-digit percentages. This underpins predictions that Civitas will continue on its strategy of raising yearly dividends by consumer price inflation (CPI) too. Consequently, the UK share boasts big yields of 5.1% and 5.2% for this year and next.

#2: Urban Logistics REIT

The prospect of the Covid-19 crisis extending long into 2021, or possibly longer, won’t worry those UK shares with significant e-commerce exposure. Indeed, online shopping is likely to remain robust even when pandemic lockdowns are rolled back. A whopping six-out-of-10 respondents to a recent SAP survey said they “will maintain some of their new online shopping habits” even when restrictions are eased.

All this bodes well for Urban Logistics REIT (LSE: SHED). This firm which provides warehousing and logistics spaces to online retailers, delivery firms and makers of fast-moving consumer goods. It’s a great signal for dividend chasers too as, under real estate investment trust (or REIT) rules, this UK share must pay a minimum 90% of profits to shareholders via dividends. For the financial years to March 2021 and 2022 this feeds through to huge dividend yields of 4.8% and 6.5% respectively.

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Share investors clearly need to stay careful before splashing the cash With this in mind, here are two top UK shares I think should pay huge dividends next year, regardless of broader economic conditions.

The perfect UK share for uncertain times?

Civitas Social Housing (LSE: CSH) offers share investors the perfect blend of big dividends and strong and sustained earnings growth. City analysts reckon annual profits here will rise 13% in the financial year ending March 2021. They predict a further 11% bottom-line rise in fiscal 2022 too.

Meanwhile, current dividend projections for this year and next create jumbo 5.2% and 5.3% dividend yields respectively.

The outlook for many UK shares remains uncertain for 2021 as the Covid-19 crisis rolls on. It’s hoped that recent developments on a vaccine will help the global economy rebound strongly next year. But delays in the mass rollout of such a silver bullet would put paid to such hopes.

This is not an issue that Civitas Social Housing investors need to worry about though. It offers accommodation to adults who have specialist care needs. This UK share’s services are constant during all points of the economic cycle. And this particular segment of the property sector is one of the fastest growing in Britain.

Getting rich as e-commerce explodes

Grabbing a slice of the e-commerce segment is also a terrific idea for 2021. One of the shares I bought in my ISA to ride this trend is Tritax Big Box REIT (LSE: BBOX), which owns and lets out ‘big box’ warehousing and logistics facilities to blue-chip retailers, fast-moving consumer goods (FMCG) manufacturers and couriers.

Buying real estate investment trusts (or REITs) is a particularly good idea for income investors. This is because they must distribute at least 90% of annual profits by way of dividends. This means that Tritax Big Box carries a chubby 4.2% dividend yield for 2021.

Time and again I’ve talked about the benefits of getting exposure to the e-commerce sector. City analysts reckon earnings at this particular share will rise 9% in 2021. And it’s no surprise given the rate at which online shopping activity is accelerating. Fresh data from Deloitte illustrates this point perfectly. The auditor reckons that, in the US, some 64% of all festive holiday spending will be made online this year. This compares with 59% in 2019 and 51% five years ago.

It’s a phenomenon that is being witnessed in most parts of the globe. And it’s one that makes Tritax Big Box a UK share I plan to hold through to 2030 and most probably beyond.

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Socially responsible investment

Civitas Social Housing (LSE: CSH) is a FTSE 250 listed investment company that invests in social housing. More specifically, the group invests in social homes that are designed for specialist supported living. Its properties typically house adults with learning difficulties and other significant care needs.

The group’s housing is designed to improve tenant wellbeing. The homes are often a much preferred and cost-effective alternative to hospitals and care homes. Tenants are able to live freely in their own homes, with the benefit of dedicated 24/7 care. Civitas’s investment in effect facilitates improved care for these vulnerable adults, who would otherwise be stuck on waiting lists. The group adds much needed supply to a market where there’s an abundance of demand.

Civitas currently owns a diversified portfolio of over 600 properties, which collectively house over 4,200 residents. It’s been estimated that the company’s investment creates over £114m of social value each year. That’s £3.50 in social value created for every £1 invested.

What’s more, Civitas does all of this profitably. In the year ending 31 March, the group generated after-tax profits of £38m, up from £20m a year earlier. Recent updates suggest that performance has been completely unaffected by Covid-19. Income essentially comes from government provided housing benefit, which is non-discretionary spending-

Civitas does have a slightly high price-to-earnings (P/E) multiple of 18, but compensates with a dividend yield of just under 5%. The fact that earnings are reliable and predictable, along with its positive social impact, makes these ethical shares a buy in my view.

An ethical growth share

Another ethical share I like is Airtel Africa (LSE: AAF). The group specialises in providing telecommunications and mobile money services to customers in 14 African countries. Airtel provides internet data access and financial services to remote parts of Africa. The group is dedicated to promoting financial inclusion and reducing the digital divide. Its mobile money services enable cross-border money transfers at an affordable price, allowing migrant workers to send money back home to their families.

In response to Covid-19, the group has increased its support to African communities, providing free data for educational purposes and financial support to essential workers. Airtel has also recently announced a partnership with UNICEF, which aims to provide children with remote access to learning and to provide cash assistance to their families. The group also works with a group of primary schools to improve the quality of education for more than 18,000 schoolchildren.

Airtel is not a charity though. In the financial year ending 31 March, revenues grew 13% to $3.4bn, while net profits came in at $408m. The group has over 110m customers. With Africa’s growing middle class, favourable demographics and increasing smartphone usage, I think the future looks bright. A P/E of around seven and a huge 7% dividend, also make this ethical share a buy in my opinion.

The post 2 of the best ethical shares I’d buy in 2020 appeared first on The Motley Fool UK.

I liked the idea of borrowing thousands, rolling up my sleeves and filling skips with all the stuff I’d rip out of a property in an effort to turn it around. It seemed like a path to riches, and I couldn’t wait to get stuck in.

And I did. But owning a property for rent requires constant ongoing time, attention and reinvestment of money. As investments go, buying and letting a property demands a lot of you.

Passive income and growth potential

Luckily for me, property prices rose a lot and, in the end, my property investment was worth all the time and effort. However, I wouldn’t get involved in buy-to-let property today because it’s hard for me to imagine property prices rising much in the decades ahead.

But there’s another big reason for me to avoid the hands-on buy-to-let market and that is I’m a much lazier person now than I used to be! Instead, I’d rather seek capital gains and income by investing in the shares of companies running a property business.

For example, Civitas Social Housing (LSE: CSH) pays a dividend yielding around 6%, which I think is attractive. The firm operates as a supported living and social housing Real Estate Investment Trust (REIT), which strikes me as a steady area of activity.

Today’s half-year results report revealed to us some decent progress with the figures. Compared to the equivalent period last year, the net asset value per share rose by 1.1%, the annualised rent role was up by 25% and diluted earnings per share shot up by 40%. The directors put their seal of approval on the outcome by pushing up the interim dividend by 6%.

The company has a portfolio of 599 properties with more than 4,000 tenants and made acquisitions worth just over £10m in the period. The accommodation is for people with learning disabilities, autism, and mental health disorders. There’s also provision for women needing refuge. The average tenant age is just 33 years-old, so it’s a specialist area, but one that strikes me as experiencing high and continuous demand in today’s world (unfortunately).

Supply-demand imbalance

Meanwhile, there’s decent geographic spread because Civitas has properties located in half the local authority areas in England and Wales. Non-executive chairman Michael Wrobel said in the report that there is a “severe” supply-demand imbalance in specialist supported accommodation driven by strong demographic trends. Specialist supported living is “one of the fastest-growing sub-sectors in healthcare real estate.”

My guess is that Civitas will continue to grow its operations in the years ahead. Meanwhile, with the share price close to 89p, you can pick up a few of the shares on a forward-looking earnings multiple of just under 16 for the trading year to March 2021 and the anticipated dividend yield is a little over 6%. The price-to-book value is running at about 0.8. I think the valuation is attractive.

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