In the FTSE 250 alone, 108 companies have cancelled, suspended or cut their dividends this year. According to AJ Bell, UK dividend payments have fallen by around £40bn in 2020.
But I believe there are still some great investments out there offering dividend income. I’ve identified two property-related shares from the FTSE 250. I think both offer attractive dividends and share price growth.
Box up this FTSE 250 gem
One of the top performers in my own portfolio is FTSE 250 Real Estate Investment Trust Tritax Big Box REIT (LSE: BBOX). The company does as its name suggests. It owns huge distribution warehouses in strategic locations near main transport hubs and large cities.
The high-tech facilities are rented out by blue-chip retailers. As such, the company is not expecting many defaults on rent. It said it expected that 99% of Q3 rents should be collected by the end of the quarter. This type of consistency alongside long leases creates a very dependable revenue stream.
The FTSE 250 firm has been profiting from the shift to online shopping. As a REIT, it is required to distribute at least 90% of its tax-exempt profits excluding capital gains back to shareholders.
In a trading update earlier this month, Tritax confirmed it was cutting its H1 dividend by 9% to 3.1p per share. However, this still equates to around a 4.2% annual dividend yield. Given its REIT status, this provides some limited security to the dividend income.
The REIT is also growing, with operating profit in H1 increasing by a quarter to £70.6m. Revenue has increased from £44m in 2015 to £144m at the end of 2019. I think Tritax offers the rare combination of a safe looking dividend and growth in the share price.
Another dividend income champion
Fellow REIT and FTSE 250 member Big Yellow Group (LSE: BYG) focuses on self-storage. You may have seen its distinctive giant yellow metal boxes.
Britain is a nation of hoarders, and Londoners in particular, living in cramped, overpriced housing are in dire need of storage. Therefore, it seems a sensible business model, in my opinion, to be a self-storage company focusing on London and its commuter towns.
The company has been growing through acquisitions, developments and rising occupancy and rent rates for some time. It has 13 sites in development and recently acquired a site in Wapping for £18.6m.
Revenues and dividends per share have been edging up since 2015. A Q2 trading update confirmed that revenues advanced 2.3% to £31.8m. This was despite a significant reduction in demand from March.
As you might expect, domestic and student move-ins saw annual drops. But this was partially offset by a 28% increase in business move-ins.
The total dividend was actually lifted by 1.8% to 33.8p per share. This equates to a dividend income of around 3.2%.
With both FTSE 250 firms operating on a price-to-earnings ratio in the mid-20s, I don’t think either are bargains. But REITs offer diversity to a portfolio and the combination of progressive dividend income streams and share price growth makes both companies great buy-and-hold candidates in my opinion.
