The British self-storage industry has grown rapidly over the past decade. Yet it still has plenty of ground to make up on more mature markets like the US. This provides terrific profits possibilities for industry goliaths like dividend-paying stock Big Yellow Group (LSE: BYG).
Research from The Self Storage Association illustrates how demand for space provided by the likes of Big Yellow is booming. Occupancy of all lettable space in Britain jumped around 6% year-on-year to 82.3%, its 2021 annual industry report showed. Meanwhile, the average net rental rate rose almost 4%, to £23.94 per square foot.
So why is self-storage in the UK booming? Life-changing events like deaths, divorces and separations and all drive the need for extra space to temporarily keep stuff. And at the moment the strong housing market, healthy levels of home renovation, and soaring student numbers are helping to supercharge demand for Big Yellow’s space.
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This explains why City analysts think Big Yellow’s annual earnings will rise 13% in the fiscal period to March 2022. It means they expect another yearly dividend hike too, resulting in a meaty 2.7% yield. This beats the FTSE 250 forward average of 1.8% by a decent margin.
I’d buy this dividend-paying stock despite its high forward price-to-earnings (P/E) ratio of 30 times. This sort of elevated reading could cause a share price collapse if trading unexpectedly worsens.
Another dividend-paying stock on my radar!
Domino’s Pizza Group’s (LSE: DOM) another dividend-paying UK stock I’ve my eye on today. The food delivery giant isn’t a flash in the pan whose earnings exploded due to Covid-19 lockdowns. No, this FTSE 100 stock has a long track record of annual profits behind it. And it seems as if its market opportunities will continue to grow in a post-pandemic environment.
Analysts expect the online food delivery market to grow almost 10% between now and 2025, as I noted in a recent piece about Deliveroo’s share price. And August’s trading update from Domino’s proves Britain’s appetite for takeaway remains strong, despite the end of lockdowns. System sales were up 19.6% in the six months to June, the firm said, adding that orders were “strong” for the beginning of the second half too.
On the downside, Domino’s faces extreme competition through large rivals such as Pizza Hut and Papa John’s as well as smaller restaurants selling via apps like Deliveroo and Just Eat. Still, I’m encouraged by the steps the FTSE 250 firm is making to build its store estate and improve its technology to light a fire under online sales.
I think forecasts that earnings at Domino’s will jump 13% in 2021 makes it attractive from a growth perspective. At the same time, the stock’s 2.6% forward dividend yield makes it a decent income stock, a reading that also beats the FTSE 250 broader average.
I think this dividend-paying stock’s a great long-term buy that’s worthy of a premium P/E ratio of 20 times.
