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Want to beat inflation? Buy this stock that's boosting its dividend by 20pc

Brandenburg Gate - Sergey Borisov
Brandenburg Gate - Sergey Borisov

Dividend rises are income investors’ best friend as near‑double-digit inflation threatens living standards. Fortunately we can report three divi increases from our Income Portfolio holdings this week.

The biggest increase by far, and the only one to exceed the current rate of inflation, was the 19.7pc rise in the second‑half dividend from Sirius Real Estate, the operator of German business parks that recently gained a toehold in Britain.

It will pay 2.37 euro cents, compared with 1.98 cents for the same period last year. This takes the divi for the full year to 4.41 cents, an increase of 16.1pc compared with 3.8 cents in 2021.

At the current exchange rate of €1.17 to the pound the annual divi would be 3.8p. Relative to the current share price of 94.1p this would give a yield of 4pc; relative to our purchase price of 74p in November 2019 the yield is 5.1pc.

The dividend is very well covered by earnings as the company has a policy to pay just 65pc of its “funds from operations”, a measure of cash flow used by property companies, in dividends.

Big, inflation-beating dividend rises are nothing new from Sirius Real Estate. In the 2018 financial year the company paid 3.16 cents, followed by 3.36 cents (a 6.3pc rise), 3.57 cents (6.3pc again) and 3.8 cents (6.5pc higher).

This year’s second-half payment is due on Aug 18.

The company’s net asset value per share increased by 15.5pc to 102.04 cents, or 87.2p at the current exchange rate. This puts the shares at a premium of 7.9pc, which we can tolerate in view of the company’s rapid growth. Hold.

Questor says: hold

Ticker: SRE

Share price at close: 94.1p

We are also getting a decent dividend rise from Triple Point Social Housing Reit, although in this case it will not be enough to keep pace with the current rate of inflation.

It said late last month that it would pay a first-quarter divi of 1.365p, a rise of 5pc from the 1.3p it paid in each quarter of last year. It said it intended to pay a total of 5.46p this year, also a 5pc increase relative to the 5.2p paid in the year to December 2021. The board said the increase was “in line with the inflation-linked rent reviews and reflects the company’s strategy of paying a progressive [rising] dividend”.

A 5.46p divi would equate to a yield of 6.3pc at the current share price of 86.1p or 5.9pc relative to the 93.2p at which the shares were added to the Income Portfolio. The dividend should be paid on or about June 24.

Triple Point said the fund’s net asset value had risen by 2.2pc to 110.7p over the first quarter when the assets were valued as if put up for sale individually, or to 123.09p if sold as a portfolio, which would incur lower costs. At the lower figure the share price discount is 22.2pc; relative to the higher NAV it is 30pc.

As we have pointed out before, the fund’s income is ultimately backed by the state and its index-linked rent increases are, unlike many trusts’, uncapped. Analysts at Stifel, the stockbroker, said this amounted to “one of the best inflation hedges in the sector”. They added: “The uncapped inflation-linked long leases and the government-backed income stream provide considerable stability and security, in our view. We retain our buy rating.”

Triple Point certainly earns its place in our Income Portfolio. Hold.

Questor says: hold

Ticker: SOHO

Share price at close: 86.1p

The final dividend increase comes courtesy of Regional Reit, the property company that specialises in offices outside London. It said it would pay 1.65p for the first quarter of this year, which is 3.1pc more than the 1.6p it paid in each of the first three quarters of last year.

The board did not give a target for the whole year but last year it paid more in the final quarter than in the first three; if we assume that it does something similar this year we can hope for at least a 3pc rise in the annual payment to about 6.7p.

At the current share price of 76.2p that would mean a yield of 8.8pc; we added the shares to the portfolio at 103p, so our yield is 6.5pc. The first-quarter divi is due to be paid on July 15.

Regional continues to collect the vast majority of the rent due. As of May 19 it had been paid 97.1pc of the amount invoiced for the first quarter. It said this compared favourably with a figure of 93.3pc for the equivalent period in 2021.

It added: “We anticipate collecting the vast majority of the balances outstanding in due course as usual.”

Questor says: hold

Ticker: RGL

Share price at close: 76.2p

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