#UAI Trading Positions

[uaitrading]

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[jamieclawhorn]

Want to retire with a million? I think the Tullow Oil share price may increase your chances

The performance of Tullow Oil (LSE: TLW) has been highly volatile in recent months. A falling oil price caused a decline in the final quarter of 2018, but improved performance has led its shares moving higher since the start of the year.

Looking ahead, the company’s strategy of increasing production could improve its financial outlook. Alongside a low valuation, this may lead to a higher share price. As such, it could be worth a closer look alongside another relatively cheap share which released a trading update on Friday.

Improving growth prospects

The stock in question is regeneration specialist U and I (LSE: UAI). The company announced it has completed the sale of the residential sites at Preston Barracks in Brighton, which brings its total development and trading gains since the start of the financial year to £30m. Although it also announced a delay to its Kensington Church Street scheme, the firm remains focused on delivering its target of £45m-£50m in development and trading gains for the 2019 financial year.

With a dividend yield of around 6.5%, U and I appears to offer income investing potential. Its income return also suggests it may offer good value for money following a share price decline of over 20% in the last eight months. With its overall strategy appearing to be sound and on track to deliver a rise in earnings of 10% in the next financial year, its potential to raise dividends and offer a share price recovery seem to be improving. As such, it could offer long-term investment appeal.

Low valuation

As mentioned, the Tullow Oil share price could generate impressive long-term returns. The company’s most recent update showed it’s been able to make progress in reducing debt levels, which could lead to a stronger and less risky business in the long run. Increasing production could be ahead, which may have a positive impact on its financial performance.

Clearly, though, the company’s financial future is highly dependent on the oil price. Factors such as the pace of global economic growth and geopolitical risks across OPEC members could have a significant impact on its price, which means there may be a period of further volatility ahead. As such, Tullow Oil’s price-to-earnings (P/E) ratio of 10.5 indicates there may be a margin of safety on offer. This suggests its risk/reward opportunity could be favourable at the present time.

Although the share price rise of 20% recorded since the start of the year is unlikely to continue unchecked, the oil price could have significant growth potential. It’s still trading considerably below its 2018 high, which indicates the wider sector may continue to offer good value for money. While risky, the returns on offer from Tullow Oil could be impressive over the long run.

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I think the rising Tullow Oil share price could slot nicely into your stocks and shares ISA

I would dump the 88E share price and buy the Tullow oil share price instead

Peter Stephens 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.

[uaitrading]

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[uaitrading]

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[jamieclawhorn]

Forget buy-to-let! I’d buy these property dividend stocks instead

The buy-to-let business isn’t getting any easier, especially if you only have only one or two properties. Interest rates can only really rise from current levels, while new regulations and tax changes mean costs are rising for many landlords.

Even if you’re still making a profit after all of that, you then have to face the risk of void periods, unexpected repair costs, and problem tenants.

This is what I do

I prefer to invest in listed property companies which operate on a much bigger scale. This normally means that the risks I’ve highlighted above are more manageable and have less impact on annual profits.

One example of this is Grainger (LSE: GRI), a FTSE 250 firm with a portfolio of almost 10,000 rental properties across the UK.

Grainger recently raised £347m from shareholders to help fund the purchase of the GRIP real estate investment trust. This REIT has a £696m PRS portfolio containing 1,700 housing units. The company expects GRIP to deliver an extra £32.5m of gross rents each year. This represents a 55% increase on Grainger’s 2017/18 gross rental income of £59.2m.

Growth focus

Grainger’s chief executive Helen Gordon has a strong focus on growth. Her aim is to build the company into the UK’s largest private rental provider. Such plans always carry a certain amount of risk, but the firm’s progress seems good to me, so far.

Debt levels have remained stable and the group’s focus on mid-market housing means that occupancy levels are high, at 97%. The firm has also recently been short-listed to build 3,000 new homes in London, on sites close to underground stations.

Grainger appears to have strong momentum. Its focus on rental should mean that cash flow stays strong, even if house prices fall. The forecast dividend yield for 2018/19 is modest, at 2.6%, but the payout is expected to grow strongly.

I can see a long-term opportunity here, although personally I prefer businesses with a stronger focus on income.

A 6% yield I’d buy

One example of the kind of property stock that I’d like to own is U and I Group (LSE: UAI). This developer specialises in urban regeneration projects, mainly in London, Manchester and Dublin.

The group’s developments tend to be mixed use, often combining office space, retail and residential property. Some are developed for long-term rental, while some are sold for a short-term profit.

The firm’s management tend to return surplus cash to shareholders each year, providing generous dividends. City analysts expect a payout of 13.4p per share this year, giving a forecast yield of 6.4%. However, my colleague Rupert Hargreaves believes the final payout could be greater.

Insider buying

The downside of this focus on dividends is that U&I’s net asset value has remained fairly flat in recent years, at about 280p per share. This could limit long-term share price gains. However, with the stock currently trading close to 200p, I think the valuation is low enough to leave room for a profit.

The firm’s board seem to share this view — since the end of August, deputy chief executive Richard Upton has bought £265,000 worth of U&I shares, taking his total holding to £6.7m. At current levels, I share Upton’s view that the stock is a buy.

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Forget buy-to-let, I believe this promising property share is all you need

Roland Head 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.

[jamieclawhorn]

Some of the best 7%+ dividend yields the market has to offer

As my colleague Roland Head noted a few weeks ago, shares in City of London Investment Group (LSE: CLIG) have produced an outstanding total return for investors of 377% since the company’s flotation in 2006.

While the growth in the share price has been an impressive 123% over this period, generous dividends have made up the bulk of the return.

And I expect this trend to continue as the asset manager goes from strength to strength.

Building a reputation

Over the past decade, City of London has been making a reputation for itself as an emerging markets (EM) asset manager. The business is relatively small in comparison to some of its larger peers with just £5bn in funds under management (FUM) at the end of September, but the firm’s performance since its IPO shows that size is not holding it back.

Unfortunately, the one downside of specialising in EMs is that capital tends to be flighty. When the going gets tough, EMs are usually the first markets sold by investors and this has been precisely what has happened over the past few months. 

Outflows from EM funds all over the world have jumped, and City of London has not been able to buck the trend. According to figures out from the company today, FUM in the firm’s EM funds declined 5% between June and September. On the other hand, City of London’s developed market equity funds saw an increase in FUM of 20%. Overall, net inflows were positive at £8m although market movements caused the overall balance to decline by 2%.

In my opinion, this small change isn’t enough to upset the group’s potential for the full year. For fiscal 2019, analysts are expecting the company to earn 38.6p, which puts the stock on a forward P/E of 10.3, hardly a demanding valuation. In addition, the stock supports a dividend yield of all of 7.2%. These attractive valuation metrics are why I believe this is one of the best income stocks on the market today.

Development income

Another income play that has recently grabbed my attention is U and I Group (LSE: UAI). This property business is focused on buying and developing undervalued real estate assets, unlocking value from unloved and misused property. It currently has a pipeline of existing projects with a gross development value of more than £7bn.

Management believes that the company can produce development and trading gains of £50m per annum based on the current pipeline of projects, and the majority of this income will be returned to investors if history is anything to go by. U and I usually distributes any excess income to investors, which meant that last year investors received 20.7p per share, giving a dividend yield of 8.9%. 

For 2018, analysts have pencilled in a yield of 5.7%, but I believe this could be a conservative estimate. If the firm can hit its projected development profits target, the return could be closer to 7% according to my calculations. With this being the case, I believe it is indeed worth keeping an eye on what U and I has to offer to investors.

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Forget buy-to-let! Consider these commercial property REITs for 5%+ yields

How low can the Standard Life share price go?

Rupert Hargreaves owns no share 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.

[jamieclawhorn]

Forget buy-to-let! Consider these commercial property REITs for 5%+ yields

The residential buy-to-let market has been subject to significant tax changes over the past few years, and one result of this has been the growing popularity of commercial property investments. This is because, unlike residential buy-to-lets, purchases of commercial properties are exempt from the 3% surcharge in stamp duty. Meanwhile, the reduction in tax relief on mortgage interest payments won’t affect commercial properties, allowing commercial buy-to-let investors to fully offset mortgage interest against rental income.

Commercial properties can offer great advantages to investors, but there are also many responsibilities to consider. Finding commercial tenants is never as easy as finding residential ones, and in many cases, it may require specific technical expertise. Your obligations to commercial tenants will also differ from residential ones — for instance, business tenants normally have rights of security of tenure under the Landlord and Tenant Act (1954).

REITs

Keeping this in mind, investing in a real estate investment trust (REIT) rather than buying a physical property might be a better investment for you. REITs can offer returns comparable to those of physical properties, yet they are relatively hassle-free and offer the benefits of diversification. Shares in REITs are also more liquid, enabling you to cash-out of your investments much more easily.

For investors looking for broad exposure to the UK commercial property market, British Land (LSE: BLND) is worth a closer look. The company, which invests in a mix of high quality retail assets and campus-focused London offices, currently trades at a 36% discount to its net asset value (NAV). As such, prospective investors have the opportunity to pick up shares in a prime commercial property portfolio for significantly less than the sum of its parts.

Dividend yield

Another advantage of British Land’s low valuation for prospective investors is the effect that has had on its dividend yield. The yield, which is inversely related to price, has risen substantially from a five-year historical average of 4% to 4.9% now. And looking ahead, shares in British Land offer a forward dividend yield of 5.1%, with City analysts expecting dividends per share will rise 3% this year, to 31p.

Those tempted by its high yield should, however, be prepared for heightened volatility in the short- to medium-term. Sluggish UK economic growth has weighed heavily on valuations, and nobody yet knows for sure what kind of environment property markets will end up facing in the possible event of a ‘hard’ Brexit.

Regeneration

Elsewhere, U and I Group (LSE: UAI) is another stock worthy of consideration. Although not technically a REIT, the regeneration-focused property company offers strong growth potential on the back of its broad and deep pipeline of developments.

In cities ranging from London, Manchester and Dublin, it has a pipeline of existing projects with a gross development value in excess of £7bn, against the company’s NAV of just under £380m. This includes its partnership in the £1.1bn urban regeneration project in Mayfield, Manchester, joint ventures and a mix of public-private partnership (PPP) investments. 

Demonstrating significant progress on the re-positioning of its investment portfolio, development and trading gains last year totalled £68.3m. Looking ahead, management expects gains to be slightly lower going forward, with anticipated returns averaging £50m or more over the next three years.

Trading at a forward P/E of 13.5 and offering a prospective dividend yield of 6.1%, value investors should keep an eye on U+I shares.

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Of course, picking the right shares and the strategy to be successful in the stock market isn’t easy. But you can get ahead of the herd by reading the Motley Fool’s FREE guide, “10 Steps To Making A Million In The Market”.

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Forget buy to let! This commercial property stock hasn’t cut its dividend for 58 years

Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended British Land Co. 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.

[jamieclawhorn]

An 8% FTSE 100 dividend yield I’d snap up today

If you’re looking for top blue-chip shares paying high dividends, you’d want to know about FTSE 100 companies offering yields of more than 8%, wouldn’t you? Before I tell you about one of my long-term favourites, I first want to look at another big yielder reporting Thursday.

It’s property developer U and I Group (LSE: UAI), and it’s just announced a total dividend of 17.9p per share for the year ended 28 February. That comprises a big special dividend of 12p, on top of ordinary dividends amounting to 5.9p, and it represents a yield of 8.8% on Wednesday’s closing price.

The shares have put on 5% as I write these words, but we’re still looking at a relatively modest forward P/E of under 12 based on the current year’s forecasts, and that would drop as low as 8.2 should 2020 predictions come good.

The property regeneration specialist operates in a business that can provide lumpy returns on a year-by-year basis, but I find it an attractive long-term segment of the industry.

U and I reported a record £68.3m in development and trading gains, which was at the top end of expectations, and that translated to a 12.2% post-tax total return with net asset value per share climbing from 278p to 303p.

It’s all part of the firm’s move to reposition its investment portfolio to target areas with strong growth potential — the company has its sights firmly set on the London City region, Manchester and Dublin — and assets worth £53.2m were sold at or above book value.

Chief executive Matthew Weiner spoke of the company’s “clear focus on regeneration and a commitment to delivering sustainable value for shareholders,”  echoing its aim to achieve consistent post-tax returns of 12% per year. I’m seeing a cash cow here.

FTSE 100 dividend

My FTSE 100 pick is in a similar business, and it’s housebuilder Persimmon (LSE: PSN). I first spotted it back when housebuilders were firmly out of favour, and I saw it was using its spare cash to hoover up plots of land when the good earth was being sold off cheap.

That looked like a canny long-term strategy to me, and Persimmon shares have more than quadrupled over the past decade while the FTSE 100 has gained just 21% — with handsome dividends thrown in as an extra.

The share price has actually gone off the boil a bit of late, and has fallen back a little since last October’s peak. I think that’s for a number of reasons. I reckon there’s probably a Brexit effect, though I really don’t think that momentous event should do any great damage to the property market — our chronic housing shortage will be here for some time yet.

The slowing of earnings growth is surely the bigger driver, as five years of annual double-digit growth is set to come to an end with analysts forecasting only 3%-4% annually for this year and next. On top of that, some are fearing for the FTSE 100’s top dividends as a number of them are seeing thinner cover than is ideal.

Persimmon’s forecast dividend is covered less than 1.2 times, but it’s a well-managed and strongly cash-generative business, and I can see it holding up.

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Hungry for income? Try this FTSE 100 stock yielding over 8%

8% yields make this FTSE 100 stock a brilliant buy

This 7.7% yielder isn’t the only dividend stock I’d buy with £2,000 today

Alan Oscroft 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.

[jamieclawhorn]

2 great stocks for under £5

Property investment and development company Helical (LSE: HLCL) has spent the last year restructuring its portfolio towards higher quality assets, and it looks as if this is starting to pay off for the firm. 

Since April the company has sold £315m of investment assets at prices in the aggregate of 2.5% above book value. These disposals have funded reinvestment activities as well as debt reduction. 

Net borrowings have fallen by £236m, substantially reducing the firm’s loan ratio from 55%, at 31 March 2016, to today’s pro-forma ratio of 43%. This debt reduction will be good news to shareholders as Helical’s high level of debt has historically been a major criticism of the group and its investment case. 

Now management is focusing on generating the most income from the firm’s portfolio. Within Helical’s results for the six months to 30 September published today, CEO Gerald Kaye said: “With our portfolio of high-quality London and Manchester offices and higher-yielding logistics properties, we now look forward to increasing our income stream from the current contracted rents of £45m towards the portfolio’s ERV of £65m as completed office space is made available to potential tenants in the next 12 months.”

Set to push higher

This realisation of the company’s full potential could, in my opinion, drive a re-rating of the shares. 

At the end of September, its net asset value per share was 465p, 51% above the current price. Over the past 12 months, the share price has gained 20% as the restructuring has unfolded and investors have bought into the growth story. 

Shares in the real estate business are changing hands for less than £5 at £3.08 today. This low share price is not an indicator of value, but the vast discount to net asset value is. As well as this enormous discount, the shares support a dividend yield of 3%. 

Helical is not the only UK property company trading at a discount to net asset value. U and I Group (LSE: UAI) is another deeply discounted income stock. 

Double-digit returns

U and I is a property regeneration company. Profits are lumpy, and the business is dependent on debt to get projects off the ground. However, these factors should not detract from the investment proposition. 

Management is targeting a 12% post-tax total annual return from property development profits and dividend income. So far this year, the company has generated development and trading gains of £6.7m taking the level of gains delivered since the start of the financial year to £16.1m, against a full-year target of £65m to £70m as legacy projects are divested. 

For the six months ended 31 August, U and I’s net asset value per share was reported at 269p, 42% above the current price of 190p. 

As well as this deep discount, City analysts are expecting the firm to distribute all excess earnings to investors for the fiscal year ending 28 February 2018. A dividend payout of 17.9p per share is projected, giving a potential dividend yield of 9.3%. The payout is expected to fall back slightly next year, but the yield is expected to remain at an attractive 6.2%.

Top income stocks 

Property stocks like Helical and U and I are great defensive income plays, highly suitable for any portfolio.

Indeed, income stocks should always form a significant component of your portfolio as research has shown that over the long term, dividends can account for 50% of investment gains. 

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One screamingly cheap small-cap stock I’d avoid and one I’d buy

Rupert Hargreaves owns no share 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.

[jamieclawhorn]

One screamingly cheap small-cap stock I’d avoid and one I’d buy

Despite performing fairly well over the last year (up 18%), shares in property regeneration business U and I Group (LSE: UAI) are still way below the highs they achieved back in the middle of 2015. Today’s interim results — along with the market’s subdued reaction to them — would suggest that there’s still a long way to go before they can recapture their former glory. 

In line with guidance

To be clear, there’s was nothing particularly awful in today’s numbers. Having realised gains of £7.2m in the six months since the end of February (and £2.2m post-period-end), the company believes it is now on track to deliver £65m-£70m of development and trading gains over the full year. According to CEO Matthew Weiner, this is in line with expectations and supportive of its three-year target to deliver “a minimum of £155m” of such gains and total annual returns of 12%. He went on to state that demand for accommodation within London, Manchester and Dublin “continues to grow” as the supply of existing housing stock reduces, suggesting a fairly positive outlook for U and I over the medium term.

So why aren’t I more bullish? It’s mostly to do with the growing amount of debt on the company’s books. At the end of August 2016, this stood at £128m. By the end of August this year, this number had climbed to almost £160m. This is despite management attempting to cut costs where it can (a £2m reduction in overheads has been targeted by the end of the financial year) and reporting “good progress” on repositioning its investment portfolio, including the identification of £50m of non-core assets for sale. 

With returns on capital employed pitifully low and levels of free cash flow anything but consistent, the cheap-as-chips valuation attached to the company’s shares — at just eight times predicted earnings — isn’t quite so compelling as it first appears, in my opinion. 

Strong performer

Thanks to last month’s excellent set of final results, I can’t help thinking that £370m cap industry peer and strategic land specialist MJ Gleeson (LSE: GLE) might be a better pick.

In the 12 months to the end of June, the Sheffield-based business grew revenue 13% to just over £160m. Pre-tax profit rose 17% to £33m and cash flow increased 42% to £19.7m. In sharp contrast to the aforementioned small-cap, MJ Gleeson had a net cash position at the end of the reporting period of £34.1m. Building on a trend that’s developed over the last few years, returns on capital invested also continue to increase, standing at just over 25% for the 2016/17 year.   

Over the reporting period, it sold 1,013 units — albeit at a slightly lower average selling price than the previous year — leading management to set a new target of doubling sales within five years. According to the company, demand for its affordable housing in the North of England currently exceeds supply with buyers “queueing on-site during open days“. Elsewhere, its South of England-focused strategic land segment reported “a record year” with the completion of eight sales as a result of strong demand from housebuilders. 

Trading on just under 13 times forecast earnings for the new financial year, shares in MJ Gleeson still look very reasonably priced and are expected to offer a 3.7% dividend yield.

Another great opportunity

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2 beautiful bargain growth stocks I’d buy right now

2 ‘secret’ small-cap stocks offering value and growth

Paul Summers 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.

[jamieclawhorn]

1 undervalued income stock to uncover

U and I Group (LSE: UAI) isn’t a name that most investors will be familiar with, even those who regularly venture outside the perceived safety of the blue-chip FTSE 100 index. There are two reasons for this.

Firstly, the company was previously known as Development Securities, before management decided to change to a more funky-sounding name after its merger with Cathedral Group in 2014. Secondly, valued at just over £234m, U and I isn’t yet rubbing shoulders with the larger London-listed property firms residing in the FTSE 100 or even the mid-cap FTSE 250 index. But that isn’t necessarily a bad thing.

Untapped potential

The London-based small-cap firm is in essence a specialist regeneration and property developer. The group’s development portfolio is focused on sites with untapped potential in urban areas, with the aim of creating long-term socio-economic benefit for the local communities, and of course delivering sustainable returns for shareholders. The group has an expanding portfolio of mixed-use regeneration projects within London, the South-East, Manchester and Dublin.

It seems like the company certainly has good intentions, but after today’s full-year results are the shares still a buy for savvy investors? During the 12 months to the end of February 2017, U and I delivered development and trading profits of £35m, compared to £51.5m for fiscal 2016. Pre-tax profits also came in significantly lower at just £400,000 compared to £25.8m the previous year.

Supplemental dividend

The poor-looking figures were primarily due to a lower level of development and trading gains, a negative first half valuation performance of its investment portfolio, and lower rental income as a result of disposals of non-core assets from its investment portfolio. After paying out £17.4m in dividends, equivalent to 13.9p per share, the company’s net asset value (NAV) decreased to £347.6m (278p per share) from £363.3m (291p per share) in FY 2016.

Management recommended a final dividend payment of 3.5p per share payable on 17 August to all shareholders on the register on 21 July 2017, bringing the total dividend for the financial year to 5.9p per share. An additional supplemental dividend of 2.8p per share will be paid on 16 June 2017 to all shareholders on the register on 12 May 2017. This will be the third supplemental dividend in the past three years and underlines the group’s confidence in continuing to generate strong cash flows from its development and trading activities.

Public Private Partnership

The group won four new large-scale Public Private Partnership (PPP) projects over the period, adding £90m to its pipeline of gains, and £1.5bn of gross development value to its portfolio. In addition, £65m – £70m of development and trading gains are set to be delivered in FY 2018, with visibility on more than £150m of development and trading gains in the next three years from existing projects alone.

I believe U and I Group still represents an attractive investment, with the shares currently trading at a 48% discount their net asset value (NAV) of 278p per share, and supported by a prospective dividend yield of 9.6% for FY 2018.

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Bilaal Mohamed 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.