If you’re on the lookout for income stocks for 2020, I highly recommend taking a closer look at real estate investment trust Tritax Big Box REIT (LSE: BBOX).
Tritax owns and operates so-called ‘big box’ logistics assets typically greater than 500,000 sq ft, which are large warehouses to you and me.
The demand for this kind of asset has boomed during the past decade, thanks to the growth of the e-commerce market. Retailers all over the world are rushing to develop the infrastructure required to fulfil customer orders at the click of a button and offer next-day delivery as standard.
In this market, companies like Tritax can’t develop new space fast enough. Over the past six years, the group’s balance sheet has grown five-fold, as it has bought and constructed assets to add to its portfolio.
The most recent additions include a pre-let asset in Corby and speculative developments in Bicester and Doncaster, which added 1.1m sq ft to Tritax’s 30m sq ft investment portfolio during the first half of its financial year.
Other developments also in the pipeline include a 661,201 sq ft big box, pre-let to the Co-Operative Group in Biggleswade. These new and planned developments should support the company’s dividend growth for the next few years.
Since 2014, Tritax’s dividend has increased at a compound annual rate of 8%, and City analysts are expecting the company to distribute 6.9p per share this year, followed by 7.1p in 2020, giving a dividend yield of 4.8% on the current share price.
On top of this, the stock is currently dealing at a price-to-book ratio of 0.98, implying you can buy shares in this REIT today for less than the current value of its assets.
Another FTSE 250 dividend stock I’d consider adding to my portfolio in 2020 is homebuilder Countryside Properties (LSE: CSP). Investors have been selling shares in this company recently due to concerns about its growth potential. However, while the share price has been sliding, the business’s fundamentals have only improved.
The company’s full-year 2019 results, which were published at the end of September, showed a 21% increase in revenues and a 14% jump in operating profit. Basic earnings per share also rose 14%. Off the back of these numbers, management declared a 51% increase in the company’s full-year dividend to 16.3p.
City analysts are expecting this growth trend to continue for the next two years. They’re projecting earnings growth 15% for fiscal 2020, and 9% for 2021.
Based on these growth targets, shares in Countryside are currently dealing at a 2021 P/E of 8.9, which is too cheap for this growing business, in my opinion. The rest of the UK homebuilding sector is dealing at a forward P/E around 10.
Shares in Countryside also support a dividend yield of 4.1%. The payout is covered 2.5 times by earnings per share, and it’s also backed up by £78m of net cash on the balance sheet.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Tritax Big Box REIT. 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.
Motley Fool UK 2019