2 property stocks I’d buy for my pension today

Here’s one big property riser and one big faller, both of which I rate as long-term buys.

| 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.

I have a few investment trusts on my pension shortlist, including real estate ones (REITs). I’ve spoken of a couple of my favourites before. I also think a REIT can be a good way of investing in property in a way that evens it out as a pooled investment.

Whatever the short-term outlook, I think the future will be healthy for the property market, and I also like a few brick & mortar construction stocks I think will do well.

Here I’m looking at two property-related stocks, which have caught my attention for opposite reasons — one was in Thursday morning’s list of top risers, the other in the top fallers list.

Building materials supplier

I took a look at Grafton Group (LSE: GFTU) a couple of weeks ago, as one in the brick & mortar category. Although its recent earnings growth was expected to slow, I liked the look of it as a long-term defensive stock. Thursday’s third-quarter trading update included a profit warning, and talk of “softer third quarter trends which have continued into October” didn’t help the share price, which dropped 10% during the morning.

While the UK’s construction business is struggling with the uncertainties brought by a potentially traumatic Brexit, the firm now expects to miss its previous expectations by around 4% to 8%. That’s despite constant-currency revenue having grown by 3.6% in the nine months to 30 September, and by 3.1% on a like-for-like basis. But the downturn can be seen in Q3, which saw like-for-like revenues gain just 0.9%.

Assuming a 6% undershoot on forecast earnings, we’re now looking at a forward P/E of 13 after the share price dip. The predicted dividend would still be covered more then three times by reduced earnings, so I think that looks safe, and it would yield 2.4%. That’s not the biggest dividend in the market, but as it’s so well covered and progressive, I find it attractive.

I still rate Grafton as a buy, and the next year or two could be a good spell for topping up.

Small-cap REIT

The big riser is the Capital & Regional (LSE: CAL) real estate investment trust, whose shares jumped 20% on Thursday. The reason is simple. It’s a big investment in the firm by Growthpoint Properties, which has made an agreed partial offer for 30.3% of the existing share capital and will invest a further £77.9m in a new share issue. The result of the deal will see Growthpoint holding approximately 51.2% of the new enlarged share capital.

Prior to the price leap on the news, Capital & Regional shares were trading on a forecast P/E of only around five, which is super low. When that happens to a share that’s genuinely undervalued, a buyout offer is often the way it’s resolved. But it can also result in existing shareholders being forced to sell their shares at a price that, even if it’s at a premium, they might not consider attractive in the long term.

This partial offer can help solve that dilemma. In the words of the company, if offers shareholders “the opportunity to realise an attractive premium to the current share price… while affording them the opportunity to participate in the future value of a recapitalised Capital & Regional.”

I think shareholders should be pleased by the news.

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.

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.

More on Retirement Articles

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

Worried about tax raids? Here’s how I’m targeting a £44,526 passive income with shares

Investing in a Self-Invested Personal Pension (SIPP) or Individual Savings Account (ISA) can supercharge one's passive income, says Royston Wild.

Read more »

Investing Articles

How I’d invest within a SIPP to target a 7% dividend yield

Zaven Boyrazian explains the steps he’d take to target a high-yield, income-generating SIPP for 2024 and beyond by investing in…

Read more »

Investing Articles

No pension at 50? Here’s my SIPP investment plan to target £16k a year in passive income!

With disciplined saving, a solid investment plan and the tax benefits of a SIPP, it’s possible to turbocharge pension growth…

Read more »

Young woman holding up three fingers
Investing Articles

These 3 investing steps could make me an £11,680 passive income!

If I was starting out on my investing journey, here's how I'd try to build a robust passive income with…

Read more »

The words "what's your plan for retirement" written on chalkboard on pavement somewhere in London
Investing Articles

Small SIPP at 55? I’d take these steps to boost my retirement savings

With a consistent savings plan, sound strategy, and some wonderful tax relief in a SIPP, it’s possible to massively grow…

Read more »

Investing Articles

Value, growth and dividends! 3 ETFs I’d buy in a Stocks and Shares ISA

Royston Wild believes these UK-listed exchange-traded funds (ETFs) could help him create a winning Stocks and Shares ISA.

Read more »

Investing Articles

How I’d pick dividend stocks to retire with a second income using my £20k ISA allowance

Our writer details his strategy to build a second income stream before retirement by investing in dividend stocks with the…

Read more »

A senior group of friends enjoying rowing on the River Derwent
Investing Articles

How I’d invest £100,000 in a SIPP to build long-term retirement wealth

There are multiple ways to build wealth in a SIPP. Zaven Boyrazian explores different methods to help identify which is…

Read more »