Income, growth, and value! An 8% dividend yield I’d buy in this stock market crash
After a mid-morning wobble, market sentiment on Wednesday has thankfully stabilised. The FTSE 100 was recently up 1.5% from last night’s close and is moving back towards earlier two-week highs above 5,500 points.
Investor confidence remains fragile, though there has been some respite in recent days. The Footsie rose by triple-digit percentages on Tuesday and is up again in midweek business. Market makers hope that a $2trn package ushered through by US lawmakers last night will help repair a global economy hammered by the coronavirus outbreak.
It’s quite possible that share markets haven’t quite hit the bottom. But there’s a broad range of brilliant shares that are quite compelling at current prices for long-term investors like me.
A falling star
One of these is Urban Logistics REIT (LSE: SHED), a share which is down 30% since 25 February.
Urban Logistics provides distribution and warehousing facilities essential for the functioning of the fast-growing Internet shopping sector. That explains why its share price has performed more resolutely amid the Covid-19 panic.
As the boffins over at Morgan Stanley comment: “the current crisis could ultimately lead to a step-change in e-commerce retail sales.” Why? Well it’s argued that the coronavirus-related quarantine has hastened the broader transition by British shoppers from classic bricks and mortar retailers to Internet commerce.
Online shopping continues to grow
Things aren’t all a bed of roses for the likes of Urban Logistics, of course. As Morgan Stanley notes: “current volatility and GDP pressure will likely lead to demand pressures.” Still, the broker is rightly bullish in predicting that “structural demand should rebound” as more and more shoppers go online.
According to Statista, a whopping 93% of British Internet users will be shopping online by the end of next year. This would represent a full six-percentage-point rise from 2015 levels. It would also mean that the UK would have the highest e-commerce penetration rate in the whole of Europe.
Urban Logistics’s most recent financials perfectly illustrated the relentless march of the online sector. It advised back in November that both net rental income and earnings (on an EPRA basis) soared by 31% in the six months to September, a result that was driven also by extra acquisitions.
Grab an 8%-plus dividend yield
City analysts certainly don’t expect Urban Logistics’s recent record of strong profits growth to cease because of the Covid-19 breakout. Consensus suggests the firm will follow an expected 20% bottom-line rise in the fiscal year to March 2020 with a 12% increase in the next period.
And this leaves the AIM stock dealing on a low, low forward price-to-earnings multiple of 11 times, a reading that I believe provides plenty of long-term upside potential. Combine this with a gigantic corresponding 8.3% dividend yield, and I reckon Urban Logistics is worthy of a close look today.
The post Income, growth, and value! An 8% dividend yield I’d buy in this stock market crash appeared first on The Motley Fool UK.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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 2020