I’ve been talking up self-storage specialist Big Yellow Group (LSE: BYG) for years now.
It’s true that the political and economic troubles created by Brexit mean that Britons are becoming more and more careful with their money, but in this day and age, extra storage space appears to be a necessity rather than a luxury, a reflection of our growing hoarding culture and smaller and smaller living spaces for millennials.
Big Yellow proved all of this with its latest set of financials released yesterday.
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The FTSE 250 firm said that a lower revaluation gain in the six months to September caused pre-tax profit to fall 22% year-on-year to £61.4m. This was the only blot on an otherwise robust set of numbers in which the firm declared that like-for-like revenues rose 7% to £62m, driven by an improvement in occupancy (which rose 1.5% on a like-for-like basis to 84.9%) as well as increased rental rates.
As a consequence, the storage star had the confidence to lift the interim dividend 9% on-year to 16.7p per share. A 16% improvement in operating cash flow, to £34.6m, must have gone some way to facilitating such a bulky payout increase.
Expanding to thrive
Big Yellow also provided an update on its expansion and development strategy which it is “aggressively” pursuing, and it currently has 11 sites in the pipeline as it builds its store network, predominantly in the economically-stronger regions of London and the South East.
So City analysts are expecting the business to roar back from a predicted 51% earnings duck in the year to March 2019 with an 8% rise in the following period. And thanks to its buzzing expansion programme I’m tipping Big Yellow to remain a strong profits creator and thus decent dividend raiser as well.
In the meantime the number crunchers are forecasting a 33p per share dividend for fiscal 2019, up from 30.8p last year and yielding an inflation-shredding 3.5%. And next year a 35.8p reward is anticipated, driving the yield to an even better 3.8%.
A prospective P/E multiple of 22.5 times may make Big Yellow an expensive pick on paper, but I believe that its exciting growth strategy, not to mention its resilience in challenging conditions, makes it worthy of such a premium.
11% yields
If you’re looking for stunning value then Bovis Homes Group (LSE: BVS), which closed at its cheapest for 18 months just yesterday, is a great income share to pick up today.
At current prices the homebuilder changes hands on a forward P/E ratio of just 9.5 times, a figure which suggests to me that the market is far too bearish right now. Sure, the uncertain economic outlook may be pressuring homes demand right now, but in my opinion the UK’s housing shortage should keep earnings at the likes of Bovis on an upward path. And this was underlined by its news that it is “fully sold for this year” and that it is still targeting “a record year of profits for 2018.”
City brokers share my optimism and are predicting earnings expansion of 42% in 2018 and 15% next year. These bright forecasts also support anticipated dividends of 101.9p per share this year and 103.5p next year, figures that yield a stunning 11.1% and 11.3% respectively.
All things considered, Bovis provides plenty for investors to get their teeth into. I’d be happy to buy it now and hold it long into the future.
