This property stock could buck a recession

This company offers superb defensive qualities.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Manager and developer of student accommodation, Unite (LSE: UTG), has released a positive trading update today. It shows that demand for student accommodation remains high and is showing no sign of slowing down. With Unite having a sound business model and enviable operating environment, it could perform well in any economic conditions.

Unite’s occupancy rate for the current academic year is 98%, with the company recording average rental growth of 3.8% versus the prior year. The main reason for this strong rate of growth is that student numbers in the UK continue to increase. In the current academic year, overall student numbers have increased by around 40,000. Most of this rise is at mid-to-upper tariff universities, where Unite is focused.

Looking ahead, demand for education in the UK is unlikely to be impacted by a recession. In fact, if a recession hits due to Brexit then it could encourage more UK-based young people to attend university in order to delay seeking a job, and to also improve their job prospects in what could be a more competitive employment environment. Similarly, a weaker pound could encourage more foreign students to come to the UK since it will be cheaper, with the standard of education unlikely to be impacted by economic challenges.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

As such, Unite faces a bright future even if the UK economy endures a difficult period. The company is expected to increase its bottom line by 13% in the current year and by a further 16% next year. This puts it on a price-to-earnings growth (PEG) ratio of only 1.1, which indicates that capital gains are very much on the cards.

Furthermore, Unite remains a top-notch income play. As mentioned, its business is stable and relatively defensive, which makes the payment of its dividend likely compared to its index peers. And with dividends being covered 1.5 times by profit, there’s scope for them to rise at a faster pace than earnings over the medium term. This means that Unite’s current yield of 3% could move higher at a brisk pace.

Value for money

Of course, the property sector includes a number of attractive opportunities right now. Brexit has caused uncertainty within the industry and for long-term investors, now could be a good time to buy. One stock that offers excellent value for money is housebuilder Persimmon (LSE: PSN). It currently trades on a price-to-earnings (P/E) ratio of only 8.6, which shows that it has a wide margin of safety. Not only does this equate to upward rerating potential, it also means that Persimmon’s share price may not fall heavily if house prices begin to slide.

Persimmon also has a yield of 6.6% from a dividend that’s covered 1.7 times by profit. This indicates that despite the potential for a dip in earnings, Persimmon’s dividend prospects remain healthy. However, because of Unite’s more obvious defensive characteristics, it has greater appeal than Persimmon given the uncertain outlook for the UK economy. Although both stocks could be sound long-term buys, Unite has the superior risk/reward ratio at the present time.

This AI stock is becoming a digital juggernaut in a £ 12.5 billion market!

🤖 Curious about the next big player in AI? 🤖

Our leading industry analysts have uncovered a trailblazing content platform that's revolutionising the industry with its unparalleled generative AI technology, setting new standards in creativity and efficiency.

Care for a sneak peek?

Trusted by global giants like Amazon, Disney, and Netflix, this innovative company is not just transforming digital media with AI-generated 3D content but is also capturing a significant share of a £12.7 billion market!

With a remarkable 62% gross margin, indicating exceptional profitability and operational efficiency, this company's growth trajectory positions it as a must-watch for savvy investors.

Best of all, we're offering exclusive access to the name of this game-changing stock, absolutely free!

Discover your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Group of young friends toasting each other with beers in a pub
Investing Articles

1 Warren Buffett stock I’m staying well away from

Warren Buffett’s Berkshire Hathaway has been buying shares in Constellation Brands recently. But Stephen Wright prefers its FTSE 100 counterpart.

Read more »

Santa Clara offices of NVIDIA
Investing Articles

Nvidia stock just hit an all-time high. So could it still make sense to buy?

Nvidia stock has hit an all-time high today. Our writer reckons it may still be cheap from a long-term perspective.…

Read more »

Rolls-Royce's Pearl 10X engine series
Investing Articles

As Rolls-Royce shares smash record after record, could they be a bargain even now?

Rolls-Royce shares have performed incredibly in recent years. This writer reckons they may yet go even higher -- here's his…

Read more »

Mature black woman at home texting on her cell phone while sitting on the couch
Growth Shares

2 UK stocks that could be under pressure if fiscal problems keep rising

Jon Smith talks through a couple of UK stocks that he thinks could be under pressure if the government change…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

2 FTSE 100 shares with low P/E ratios! Which should I consider buying?

I'm hunting for the best UK value shares to buy this July. Here are a couple from the FTSE 100…

Read more »

Young Caucasian woman holding up four fingers
Investing Articles

4 stocks I bought for my Stocks and Shares ISA in June!

Our writer reveals what he thinks is the most exciting from the four investments he made in his Stocks and…

Read more »

Close-up of British bank notes
Investing Articles

5 dividend shares yielding 5.9%+ to consider in July

Christopher Ruane discussed a handful of FTSE dividends shares yielding close to 6% or higher that he reckons investors should…

Read more »

Branch of NatWest bank
Investing Articles

Up 50% in just 1 year, can the NatWest share price keep going?

Christopher Ruane looks at a couple of ways to evaluate the Natwest share price and decide whether it offers a…

Read more »