£5k to spend in February? I think this growth AND dividend hero could help you retire rich!

Royston Wild discusses a brilliant all-rounder to buy before the end of February.

| 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.

Unite Group (LSE: UTG) is one of those shares that could make you a fortune before you retire, I believe. It’s not just that booming student numbers are driving demand for the FTSE 250 firm’s accommodation. It’s that the business remains committed to expansion to latch on to these massive structural opportunities.

Just today Unite announced exciting news on its expansion programme. The FTSE 250 firm has received planning permission for a 416-bed development in the centre of Bristol. It describes the South-West hub as “one of the UK’s leading university cities” which “continues to see strong growth in student numbers.” The site will be up and running at the beginning  of the 2021/22 academic year.

Portfolio values continue swelling 

Housing demand from both homegrown and overseas students continues to rip higher and yet there remains a huge shortfall in the number of available homesteads.

It’s why Unite’s property portfolio — which comprises more than 30,000 beds in developments across 22 British university towns and cities — is now worth £2.85bn, according to financials released earlier this month. This represents a yearly like-for-like increase of 3.1%, driven by strong rent growth, as well as yield compression in London.

This shortage of beds means that there’s already a rush by students to secure accommodation. Unite has seen more than two-thirds of its rooms booked for 2020/21.

It’s quite probable that the firm will release a sunny full-year update on February 26 too. Its share price has ballooned 160% over the past five years and there’s clearly room for more movement, possibly as soon as next month’s release.

Dividends up 500%+!

Unite doesn’t come cheap. For 2020 it trades on a forward price-to-earnings (P/E ratio) of 28.7 times, some distance above the widely-regarded value benchmark of 15 times. City growth forecasts illustrate quite why it’s so well regarded by market-makers though.

This year, the firm’s expected to record a 20% annual earnings rise, keeping its long record of yearly profits expansion rolling. The bottom line will rise 14% in 2021 too, forecasts suggest. The possibility of more strong and sustained earnings expansion isn’t the only reason why Unite excites me though: dividends at the business also continue to rocket.

Soaring profits in recent years mean that annual payouts have exploded 504% during the five years to 2018. City analysts are forecasting another big rise in 2019 to 31.7p per share from 29p in the prior period.

And expectations of a return to double-digit earnings growth in 2020 lead to expectations of spectacular rises over the medium term. Sums of 38p and 43p per share for this year and next are anticipated, resulting in inflation-beating 2.9% and 3.3% yields. There are bigger yielders out there, sure. But few of these firms’ long-term outlooks are as exceptional as that of Unite. I reckon this is a FTSE 250 growth and income hero to buy today and hold forever.

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.

Royston Wild 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

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »