These 7%+ yielders could be Warren Buffett stocks

Roland Head looks behind the scenes at two businesses with ultra-high dividend yields.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Billionaire US investor Warren Buffett is a big believer in investing in assets that will produce rising levels of cash over long periods. In a recent interview, I saw him emphasise how his focus is on finding businesses that will grow, not just share prices.

Today I’m going to look at two stocks which both offer dividend yields of more than 7%. If these payouts prove sustainable, these could be great Buffett-style stocks to tuck away in your portfolio.

A slice of UK plc

Regional REIT (LSE: RGL) floated in 2015 and owns a portfolio of 150 commercial properties around the UK, all of which are located outside the M25.

Should you invest £1,000 in Marston's Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Marston's Plc made the list?

See the 6 stocks

About 63% of sites are offices, with 26% industrial. Retail accounts for 11% and is considered non-core by the company, whose focus is on replicating the mix of businesses in the UK economy.

A safe 7% yield?

In half-year results published this morning, Stephen Inglis, Group Property Director, said that demand for office and light industrial sites was “steady” and that he expected occupancy to increase.

Operating profit excluding property gains rose from £13.4m to £14.3m during the first half. The interim dividend was increased by 2.9% to 3.6p per share.

Looking at the business, portfolio occupancy by value increased from 82.7% to 83.3%. The group’s average unexpired lease length to first break is 3.5 years. So earnings visibility should be reasonably good in the short-medium term, but is less certain after 2021.

The group’s loan-to-value ratio is fairly high at 47.3%, but this is partly the result of an acquisition in March and is expected to fall. The group is also in the process of refinancing its borrowings following this deal, which I expect will reduce interest costs.

Although Regional REIT’s rental income could be hit by a recession, the business appears to be in reasonable shape at the moment. The shares trade slightly below their EPRA net asset value of 106p and the forecast dividend of 7.9p per share gives a yield of 7.8%. Based on this valuation, I’d be tempted to have a closer look.

Double up on pubs?

Pub chains have reported mix trading conditions this year. Marston’s (LSE: MARS) is no exception. The group’s share price has fallen by nearly 25% so far in 2017. However, the latest trading update seemed cautiously optimistic to me.

Like-for-like sales were up by between 1.3% and 1.9% across its different brands, and were ahead of the market average in a number of cases.

Ralph Findlay, Marston’s chief executive, says that he remains confident of “further profitable progress” for the full year. Broker consensus forecasts suggest that the group will generate a net profit of £84.6m this year, up by around 6% on last year.

The stock currently trades on a forecast P/E of 7.4 and at 20% discount to its book value of 125p per share. A dividend of 7.55p per share is expected, giving a prospective yield of 7.3%. This payout should be covered comfortably by forecast earnings of 14p per share, but I think it looks a little stretched in terms of the group’s cash flow.

Based on the firm’s latest figures and the risk that trading conditions could get tougher, I’d probably rate this stock as a ‘hold’ until we know more.

AI Revolution Awaits: Uncover Top Stock Picks for Massive Potential Gains!

Buckle up because we're about to dive headfirst into the electrifying world of AI.

Imagine this: you make a single savvy investment in some cutting-edge technology, then kick back and watch as it revolutionises entire industries and potentially even lines your pockets.

If the mere thought of riding this AI wave excites you and the prospect of massive potential returns gets your pulse racing, then you’ve got to check out this Motley Fool Share Advisor report – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And here’s the kicker – we’re giving you an exclusive peek at ONE of these top AI stock picks, absolutely free! How’s that for a bit of brilliance?

Get your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Dividend Shares

Of the 20 highest-yielding FTSE 100 stocks, this is my top pick

This FTSE 100 stock currently offers a yield of 6.4%. But Edward Sheldon believes it’s capable of providing share price…

Read more »

Investing Articles

Could Tesla’s share price jump over the next 12 months? These analysts think so!

Tesla's share price has fallen by almost a third since 1 January. But optimism is high that Elon Musk's company…

Read more »

Investing Articles

I asked ChatGPT where the FTSE 100 will be in 6 months: here’s what it said…

Let’s be realistic, ChatGPT can’t predict the future. But it did do a good job of compiling data from brokerages…

Read more »

Investing Articles

Could the Rolls-Royce share price hit £10?

The Rolls-Royce share price has taken most analysts by surprise with almost everything going right for the British engineering giant.

Read more »

Investing Articles

4 REITs Fools own for passive income

REITs often have higher-than-average dividend yields compared to other stocks, making them a solid choice to consider for passive income…

Read more »

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »