FTSE 250 incumbent Tritax EuroBox (LSE: EBOX) is one stock I’m planning to buy as soon as I have some investable cash.
I reckon it could be a no-brainer to help me boost my wealth through dividends and capital growth!
Here’s why.
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Could interest rate cuts send the shares soaring?
Tritax is set up as a real estate investment trust (REIT). This simply means it’s a property business that must return 90% of profits to shareholders in return for tax breaks and other perks. This type of shareholder return policy is an attractive trait I find myself drawn to.
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Higher interest rates have pushed down many stocks like Tritax, as property values have suffered, and borrowing costs have increased. With the potential for interest rate cuts now more realistic than in recent months, I reckon the shares could climb soon.
The shares are down 3% over a 12-month period, trading for 57p as I write, compared to 59p last year. However, I reckon this is where the value lies. So, I’m looking to buy some shares before the the price potentially rises.
Risk vs reward
Tritax’s dividend yield of over 7% is very attractive. Plus, it’s much higher than the FTSE 250 average of close to 2%. However, I do understand that dividends are never guaranteed.
Breaking down Tritax’s valuation, the shares look decent value for money, in my view. They currently trade on a price-to-earnings ratio of close to 13.
Next, the demand for logistics and warehousing space has risen sharply in recent years, especially in the UK. This is mainly linked to the e-commerce boom and changing shopping habits. I know I tend to buy lots online, compared to frequenting my high street once upon a time. It seems I’m not alone.
Businesses need warehouse spaces to cater for this demand, and this is where Tritax comes in. The beauty for Tritax is that Europe seems to be lagging behind in providing such quality spaces. This means growth could be on the cards for the REIT.
The biggest issue I believe Tritax faces is that of continued economic issues. Let me be clear, there is no guarantee that interest rates will be slashed. Plus, even if they are, there’s no telling when that might be, or by how much.
Due to this, Tritax might still be facing issues such as limited growth opportunities due to higher borrowing costs. Plus, the continued turbulence could hurt existing rental agreements. Overall, performance and returns could be hurt here. I’ll be watching closely.
Fortune favours the bold
Despite Tritax’s fate being linked to the economy, the reward outweighs the risk by some distance. Being overly cautious could mean I miss out on a great opportunity. However, it would be remiss of me not to bear the pitfalls in mind.
A large part of Tritax’s potential moving forward is the changing face of shopping, as well as an under penetrated European market space. With a decent set of fundamentals, I reckon there’s more than enough meat on the bones for me to capitalise on here.
