Thursday May 29, 02:55 PM
A 14% Gross Rental Yield
By Maynard Paton
I've just recommended my first-ever property company for The Motley Fool's Champion Shares service.
We all know the property industry is going through a tough time. The credit squeeze has pushed borrowing costs higher and it seems
hardly anyone is now able to -- or even wants to -- buy. Commercial and residential prices have fallen from last year's peak, perhaps 10% or more depending on which survey you read. With no end to the credit problems in sight, investors have fled the sector. Share-price falls of 50% or more have been commonplace.
Nevertheless, I'd like to think the gloom and doom has been overdone with my particular tip. For a start, the market cap of my chosen company is now well below its last reported net asset value -- though I admit that is the case with many property shares at the moment!
Another way of looking at my share's valuation is by using the group's rental income. If you were to buy my recommendation outright and clear all of its debts, I calculate a repeat of last year's rents could generate you the equivalent of an 'ungeared' gross rental yield of 14% at my buy limit. That seems attractive to me when financing costs may be around 6-7%.
Backing this particular recommendation must surely be some of the most durable directors in the property industry. Both executives have served on the board for more than twenty years and have helped deliver an illustrious dividend record -- the payout at this business has been lifted every year since the late Seventies, a period that importantly encompasses the last property downturn of the early Nineties. I don't think it is a coincidence that this dividend performance has been delivered by directors who, alongside their families, have more than £300m riding on the share price. What now? I hope you can take advantage of my latest recommendation through the Champion Shares service. Though I admit it is not the type of share that could turn us all into millionaires overnight, I feel patient investors have a good chance of enjoying very acceptable returns over time. Of course I could be wrong and, as with any stock-market investment, this tip could end up losing you money.
Once you've joined the Champion Shares community through this 30-day free trial, you can learn about all my share recommendations. Just click on the 'Latest BUY/HOLD/SELL Summary' link on the Champion Shares website to discover their identities.
The 30-day free trial also provides full access to subsequent updates plus numerous other share ideas. Recent research covers Tesco (LSE: TSCO.L - news) (LSE: TSCO), AstraZeneca (LSE: AZN.L - news) (LSE: AZN) and London Stock Exchange (LSE: LSE.L - news) (LSE: LSE). Remember: there is no obligation to pay a penny.Risk Warning
You run the risk of losing money when investing in shares. Prices may change quickly, they may go down as well as up and you may not get back the full amount invested. You should not invest using money you cannot afford to lose. We have taken all reasonable care to ensure that all statements of fact and opinion contained in this publication are fair and accurate in all material aspects. Investors should seek appropriate professional advice from their stockbroker or other adviser if any points are unclear. Champion Shares gives general advice only, and the investments mentioned may not necessarily be suitable for any individual.
Authorised by The McHattie Group, St Brandon's House, 29 Great George Street, Bristol BS1 5QT | Tel: 01179 200 070 | Fax: 01179 200 071 | E-mail: enquiries@mchattie.co.uk
The McHattie Group is authorised and regulated by the Financial Services Authority
|
Send Article by Email
