Volatility has returned to the markets with a vengeance in recent weeks with some big one-day drops and bounces. I’m currently looking at the FTSE 100 at 7,250, which is 2% up from its recent low at the end of last week but 7% below its all-time high of 7,779 a month ago.
I’ve got my eye on two reliable dividend growth stocks, one of which announced a “strong performance” in its annual results today, including a 21st successive year of dividend growth. It also said: “We look forward to the future with confidence.”
Health and wealth
Shares of Primary Health Properties (LSE: PHP) have nudged modestly higher to 115.5p on the back of today’s results but are still below — currently by 6.5% — their previous high of 123.5p.
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This investor in modern primary health facilities in the UK and Ireland had a portfolio of 306 properties at the year-end, valued at £1.36bn. It acquired 10 properties during the year at a cost of £72m and said it has a strong pipeline of targeted acquisitions of £150m.
Year-end net asset value (NAV) per share stood at 100.7p — a 10.5% uplift — and earnings per share (EPS) increased 8.3% to 5.2p. The stock’s 15% premium to NAV and price-to-earnings (P/E) ratio of 22 may look on the expensive side, but the valuation reflects the attractive dynamics of this sub-sector of real estate.
Secure, long-term cash flows are behind the company’s excellent record of annual dividend growth and the latest payout of 5.25p (up 2.4% on last year) gives a trailing yield of 4.5%. The board has already declared a first quarterly dividend for 2018. This points to a full-year payout of 5.4p and a prospective yield of 4.7% for investors today. It makes the stock look very buyable to my eye.
Value in infrastructure
There’s been a good bit of news from 3i Infrastructure (LSE: 3IN) since I wrote about its half-year results in September and described it as a stock I’d happily buy for the long term. The news since only reinforces my view.
The company invests in infrastructure businesses and assets that generate long-term yield and capital growth, principally in the UK/Ireland and Continental Europe. It said recently that its exposure to projects serviced by collapsed Carillion is less than 1% of its investment portfolio and that it will make no provisions against this exposure. Good news.
Even better news was the announcement in December of two divestments: its stake in Finnish power grid company Elenia for £725m (compared with a value on the books of £498m) and its stake in Anglian Water for £395m (book value £288m). The company estimates a post-divestments pro forma NAV per share of 199p. The shares are currently trading at about this level, having been pulled down 7% in line with the recent market decline.
Subject to completion of the divestments, the board expects to return surplus cash of between £400m and £450m (39p-44p a share) to shareholders. This in addition to a target dividend of 7.85p (yield 3.9%) for the year ending 31 March. Another solid dividend growth stock, 3i’s payout is forecast to advance to 8.1p (yield 4.1%) for fiscal 2019.
