"As investors, we feel akin to the residents of a City threatened by a hurricane. We know that there is a storm out there offshore, and the media is getting increasingly excited about all the dreadful damage that could occur. They may be right but dire predictions are good copy, and storms sometimes moderate or veer off in another direction. We batten down the hatches and, if we can, leave town, only to sneak back after the storm has passed to see that well protected property is still there and damage is generally less than predicted.
The two really dreadful property share markets in my lifetime have been 1973-75and 1989-92. Both came against the background of sky high interest rates, large scale overdevelopment and a sharp rise in unemployment which drove down rental values. We do not have overdevelopment today, no-one is forecasts sky high interest rates or a doubling of unemployment. So the fall in property values is a pricing issue.
For the moment uncertainty prevails and markets don't like it. All news is taken as bad news. What we can say is that, short of Armageddon, we have seen the worst of the share price falls in the well run well financed property companies.
I think that the point of maximum pessimism is still to be reached. An event may mark that point, but what event I cannot tell. That event could conceivably occur anytime now or it may still be twelve months away.
So we wait with our hatches battened down - staying in town as an investor dedicated to property - trying not to be too brave or too pessimistic. We will search for opportunities in others' distress and look forward to the day when we can report a return to decent growth."
Sunday, 23 December 2007
Property investment expert comments
I recently came accross this comment by Chris Turners the property manager in the Interim Statement for TR Property Investment Trust featured on www.iii.co.uk discussion board which I rather like and illustrates very vividly what situation we are in currently with respect to income generating property stocks.
Wednesday, 19 December 2007
Crystal ball gazing for 08
The secret of intelligent investing including income investing is sometimes to see beyond the here and now and go against the trend.
When everybody is telling you to sell, this can sometimes be the time to buy. In order to do this successfully investors sometimes have to look beyond the investment climate however stormy it might look.
Thinking of 08 one can only see dark clouds hiding possibly darker events for income investors. However, the events and the investments currently hardest hit could well turn out to be the best investments to hold.
I refer specifically to income generating property stocks. The FT this weekend had several articles about the prospect for income generating property shares. One highlighted the fact that the FTSE 350 Real Estate index has fallen a massive 43% in just 11 months. Some would argue it has further to fall. For instance the FT argues that in the property slump of the late 80's and early 90's the index fell 64% from it's peak in September 89 before bottoming out in September 92, therefore there are risks of buying in too early. However, the investment market is very different this time.
The economy is relatively strong with low unemployment and more importantly vacancy rates are low and there is not the over supply experienced in previous property booms. This means that as long as occupancy rates stay high then the income generating attractions of this asset class are strong.
So where next for income generating property stocks in 2008?
First of all. The credit crunch is biting. It's slowing investment. Economies such as the UK's which has been buoyed by consumer spending financed by cheap credit will slow in 2008. The Government and the Bank of England fearing a collapse in the housing market which would cause a melt down in the UK economy are likely to cut interest rates aggressively The Sunday Times has predicted that this could be done 4 times next year which would put the base rate at 4.5%. Falling interest rates suddenly stop making the returns on cash deposits look quite attractive. Suddenly the 8% plus income generated by some of the property stocks and share i have looked at start to look very attractive indeed, particularly when viewed against the already heavy discounts to asset values. Have a look at my previous article for some specific income generating property stocks to buy.
Appearance of property vulture funds in 08
I would expect to see in 08 the appearance of property vulture funds that are set up probably by hedge funds to fund the acquisition of property companies that are undervalued and/ or are having temporary funding problems because of the credit crunch. One likely victim would be Invesco Property Income Trust
Correction in property shares overdone
I am not alone in my view that the correction in property shares has been overdone. Anthony Bolton the widely respected fund manager was reported in the FT has started to buy property stocks, reportedly telling his special situations trust that there are discrepancies in valuations.
INCOME MONKEY VERDICT
I'm keeping the faith that i have expressed all along that there are some real income generating bargains amongst property shares if investors take a cautious and steady approach to buying. They should look to buy on weakness and average down where necessary. This is the approach i will continue to take into 2008. I'm confident that as the credit crunch unwinds, the economy cools and interest rates have fallen my investments in income generating property stocks will show a rebound in their capital value, a strong and growing dividend yield and look a damn sight more stable & attractive proposition than most other investments.
THE INCOME MONKEY WOULD LIKE TO EXPRESS ITS THANKS TO INTERACTIVE INVESTOR WHOS INFORMATION HAS BEING VITAL IN PUTTING TOGETHER THIS BLOG. I WOULD ALSO POINT OUT THAT THE INCOME MONKEY HAS NO ASSOCIATION WITH THIS WEBSITE.
When everybody is telling you to sell, this can sometimes be the time to buy. In order to do this successfully investors sometimes have to look beyond the investment climate however stormy it might look.
Thinking of 08 one can only see dark clouds hiding possibly darker events for income investors. However, the events and the investments currently hardest hit could well turn out to be the best investments to hold.
I refer specifically to income generating property stocks. The FT this weekend had several articles about the prospect for income generating property shares. One highlighted the fact that the FTSE 350 Real Estate index has fallen a massive 43% in just 11 months. Some would argue it has further to fall. For instance the FT argues that in the property slump of the late 80's and early 90's the index fell 64% from it's peak in September 89 before bottoming out in September 92, therefore there are risks of buying in too early. However, the investment market is very different this time.
The economy is relatively strong with low unemployment and more importantly vacancy rates are low and there is not the over supply experienced in previous property booms. This means that as long as occupancy rates stay high then the income generating attractions of this asset class are strong.
So where next for income generating property stocks in 2008?
First of all. The credit crunch is biting. It's slowing investment. Economies such as the UK's which has been buoyed by consumer spending financed by cheap credit will slow in 2008. The Government and the Bank of England fearing a collapse in the housing market which would cause a melt down in the UK economy are likely to cut interest rates aggressively The Sunday Times has predicted that this could be done 4 times next year which would put the base rate at 4.5%. Falling interest rates suddenly stop making the returns on cash deposits look quite attractive. Suddenly the 8% plus income generated by some of the property stocks and share i have looked at start to look very attractive indeed, particularly when viewed against the already heavy discounts to asset values. Have a look at my previous article for some specific income generating property stocks to buy.
Appearance of property vulture funds in 08
I would expect to see in 08 the appearance of property vulture funds that are set up probably by hedge funds to fund the acquisition of property companies that are undervalued and/ or are having temporary funding problems because of the credit crunch. One likely victim would be Invesco Property Income Trust
Correction in property shares overdone
I am not alone in my view that the correction in property shares has been overdone. Anthony Bolton the widely respected fund manager was reported in the FT has started to buy property stocks, reportedly telling his special situations trust that there are discrepancies in valuations.
INCOME MONKEY VERDICT
I'm keeping the faith that i have expressed all along that there are some real income generating bargains amongst property shares if investors take a cautious and steady approach to buying. They should look to buy on weakness and average down where necessary. This is the approach i will continue to take into 2008. I'm confident that as the credit crunch unwinds, the economy cools and interest rates have fallen my investments in income generating property stocks will show a rebound in their capital value, a strong and growing dividend yield and look a damn sight more stable & attractive proposition than most other investments.
THE INCOME MONKEY WOULD LIKE TO EXPRESS ITS THANKS TO INTERACTIVE INVESTOR WHOS INFORMATION HAS BEING VITAL IN PUTTING TOGETHER THIS BLOG. I WOULD ALSO POINT OUT THAT THE INCOME MONKEY HAS NO ASSOCIATION WITH THIS WEBSITE.
Thursday, 6 December 2007
DDs for dividends
Firstly, for all those income investors who have got fed up with the volatility haunting the share prices of many of the income generating property stocks that i have featured so far. Words of comfort from a Mr Warren Buffet, who by all accounts has done quite well at investing in his time.
There are certainly many fearful people out there when it comes to income generating stock & shares in property companies and this this may well represent a great buying opportunity. I think so and my portfolio reflects this.
Time for something completely different, just in case you thought all i invest in is property stocks & shares. Another sector that is very unloved at the moment is the media sector and particularly the newspaper industry. In many ways, its not surprising. With the internet fast being the medium of choice for many people to get their information and news and advertisers and readers migrating away from newspaper at an uncomfortable rate. Many investors perceive the newspapers industry as a sunset business. Well it is...............& it isn't.
Newspapers have realised that their days are numbered if they dont embrace technology and the internet. The result is that many have developed very strong websites and other related products that trade off the back of their traditional paper copy. One interesting high yielding income generating stock that appears to be doing very well at employing this strategy is Sport Media Group.
Most investors will not recognise this company but when i tell you that it owns the Daily & Sunday Sport you might be a little wiser. The company has been transformed over the last few months by acquiring Sport Newspapers Ltd on the 5th September. Prior to this the company was called Interative World Plc and was purely focused on digital content for the internet and mobile channels. It was effectively the digital arm of the Sport Newspaper with almost 50% of its' shares being owned by David Sullivan who was also owner of Sport Newspapers Ltd.
The deal enables the enlarged company - Sport Media Group - to exploit the growing relationship between print and digital media.
Andrew Fickling, managing director of both the Daily and Sunday Sport, said a strengthened relationship with Interactive was a "natural choice", enabling the group to grow in the online and mobile content markets and "greatly improve" its offering to readers.
Sport Newspapers was set up in 1986 by Sullivan and David and Ralph Gold, owners of the high street sex shop chain Ann Summers, who both hold 25 per cent stakes in the company.
Its titles have suffered from falling circulation over the last few years, which the firm believes comes from a lack of solid editorial. Its titles currently represent around 1.6 per cent of the "red top" tabloid market.
Sport Newspapers reported pre-tax profits of £2.8m for the nine months to May 31 on turnover of £19.6m. Interactive World posted pre-tax profits of £4.3m in the year to 31 July, 2006. It has 11 staff.
INCOME MONKEY VERDICT
The less than 'traditional' nature of this company has put many investors off. Consequently, the shares are trading at a year low of 63.5p valuing the business at less than £25 million although it is expected to turnover almost £43 million next year and generate over £12 million in profit. This put the shares on a projected P/E of 7.6 with earning per share of over 8p. This makes the continuation of the 7p dividend entirely possible putting the shares on a forward looking yield of over 11%. Income Monkey is particularly heartened by the statement of the Chairmam Simon-Hume Kendall published on the 6th of November in which he stated:
I'm just hoping with all those double Ds knocking about that they are symbolic of a future double digit dividend!
THE INCOME MONKEY WOULD LIKE TO EXPRESS ITS THANKS TO INTERACTIVE INVESTOR WHOS INFORMATION HAS BEING VITAL IN PUTTING TOGETHER THIS BLOG. I WOULD ALSO POINT OUT THAT THE INCOME MONKEY HAS NO ASSOCIATION WITH THIS WEBSITE.
"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."
There are certainly many fearful people out there when it comes to income generating stock & shares in property companies and this this may well represent a great buying opportunity. I think so and my portfolio reflects this.
Time for something completely different, just in case you thought all i invest in is property stocks & shares. Another sector that is very unloved at the moment is the media sector and particularly the newspaper industry. In many ways, its not surprising. With the internet fast being the medium of choice for many people to get their information and news and advertisers and readers migrating away from newspaper at an uncomfortable rate. Many investors perceive the newspapers industry as a sunset business. Well it is...............& it isn't.
Newspapers have realised that their days are numbered if they dont embrace technology and the internet. The result is that many have developed very strong websites and other related products that trade off the back of their traditional paper copy. One interesting high yielding income generating stock that appears to be doing very well at employing this strategy is Sport Media Group.
Most investors will not recognise this company but when i tell you that it owns the Daily & Sunday Sport you might be a little wiser. The company has been transformed over the last few months by acquiring Sport Newspapers Ltd on the 5th September. Prior to this the company was called Interative World Plc and was purely focused on digital content for the internet and mobile channels. It was effectively the digital arm of the Sport Newspaper with almost 50% of its' shares being owned by David Sullivan who was also owner of Sport Newspapers Ltd.
The deal enables the enlarged company - Sport Media Group - to exploit the growing relationship between print and digital media.
Andrew Fickling, managing director of both the Daily and Sunday Sport, said a strengthened relationship with Interactive was a "natural choice", enabling the group to grow in the online and mobile content markets and "greatly improve" its offering to readers.
Sport Newspapers was set up in 1986 by Sullivan and David and Ralph Gold, owners of the high street sex shop chain Ann Summers, who both hold 25 per cent stakes in the company.
Its titles have suffered from falling circulation over the last few years, which the firm believes comes from a lack of solid editorial. Its titles currently represent around 1.6 per cent of the "red top" tabloid market.
Sport Newspapers reported pre-tax profits of £2.8m for the nine months to May 31 on turnover of £19.6m. Interactive World posted pre-tax profits of £4.3m in the year to 31 July, 2006. It has 11 staff.
INCOME MONKEY VERDICT
The less than 'traditional' nature of this company has put many investors off. Consequently, the shares are trading at a year low of 63.5p valuing the business at less than £25 million although it is expected to turnover almost £43 million next year and generate over £12 million in profit. This put the shares on a projected P/E of 7.6 with earning per share of over 8p. This makes the continuation of the 7p dividend entirely possible putting the shares on a forward looking yield of over 11%. Income Monkey is particularly heartened by the statement of the Chairmam Simon-Hume Kendall published on the 6th of November in which he stated:
"The dividend reflects the strong cash generative nature of the Company and, given the low working capital needs of the business, the Board intends to maintain a progressive policy."
I'm just hoping with all those double Ds knocking about that they are symbolic of a future double digit dividend!
THE INCOME MONKEY WOULD LIKE TO EXPRESS ITS THANKS TO INTERACTIVE INVESTOR WHOS INFORMATION HAS BEING VITAL IN PUTTING TOGETHER THIS BLOG. I WOULD ALSO POINT OUT THAT THE INCOME MONKEY HAS NO ASSOCIATION WITH THIS WEBSITE.
Monday, 3 December 2007
Investment income gem
Some people have asked me where do i find my income stocks.
Well quite often i just come across them by chance whilst checking on the performance of my portfolio. The next share is a classic case. I was looking at one of my favourite share information sites www.digitallook.com when i noticed the name of a company. The Small Company Dividend Trust. As someone who is always seeking new income generating opportunities I immediately thought this share was worth further investigation; particularly as one of the shareholders had just shelled out near £30,000 on over doubling his stake.
The company which invests in shares in high yielding shares on the UK market has the following investment policy
It is currently trading close to its year low at 163.75p and well short of its high of 241p. The company is small with a market cap of just over £26 million. However, its big attraction is its' yield. The company pays quarterly dividends which are projected to total 13.85p for the forthcoming year putting it on a income yield of almost 8.5%.
If income monkeys do decide to take the plunge, they will be some fairly distinguished company. One of the directors is no less than the former Chancellor of the Exchequer Norman now Lord Lamont of Lerwick who has taken the opportunity of the slump in the price to top up on his holding.
INCOME MONKEY VERDICT
For those income monkeys that want exposure to the UK stockmarket without the risks inherrent with investing in a single share or stock, this trust is an ideal way of benefiting from rising valuations whilst taking a tidy income into the bargain.
Well quite often i just come across them by chance whilst checking on the performance of my portfolio. The next share is a classic case. I was looking at one of my favourite share information sites www.digitallook.com when i noticed the name of a company. The Small Company Dividend Trust. As someone who is always seeking new income generating opportunities I immediately thought this share was worth further investigation; particularly as one of the shareholders had just shelled out near £30,000 on over doubling his stake.
The company which invests in shares in high yielding shares on the UK market has the following investment policy
The Company's funds will be invested principally in companies with a market capitalisation of up to £500 million; a maximum of 20 per cent. of the Company's portfolio may be invested in companies without reference to their market capitalisation at the discretion of the Investment Manager. The Company's portfolio will comprise companies listed on the Official List and companies admitted to trading on AIM. The Company will not invest in preference shares, loan stock or notes, convertible securities or fixed interest securities or any similar securities convertible into shares. The Company will not invest in other investment trusts or unquoted companies.
It is currently trading close to its year low at 163.75p and well short of its high of 241p. The company is small with a market cap of just over £26 million. However, its big attraction is its' yield. The company pays quarterly dividends which are projected to total 13.85p for the forthcoming year putting it on a income yield of almost 8.5%.
If income monkeys do decide to take the plunge, they will be some fairly distinguished company. One of the directors is no less than the former Chancellor of the Exchequer Norman now Lord Lamont of Lerwick who has taken the opportunity of the slump in the price to top up on his holding.
INCOME MONKEY VERDICT
For those income monkeys that want exposure to the UK stockmarket without the risks inherrent with investing in a single share or stock, this trust is an ideal way of benefiting from rising valuations whilst taking a tidy income into the bargain.
Sunday, 2 December 2007
Why to buy high yield property shares
Shares in property companies have taken a pounding to the extent that some are now paying a double digit yield. For some ideas of which income generating property shares have a look at previous posts.
The UK's economy is clearly going to hit the buffers in 08. Commercial property is overvalued probably in the order of 10-15% and this situation will unwind during the next year. However, the fundamentals of investing in property are still strong for income seeking investors. With discounts in some income generating property companies running at near 50% there is plenty of scope for a fall in the underlying value of their property assets and still for an income investor to buy property assets at a discount.
The good news for income seeking investors is that rental incomes on property is fairly secure and with no immediate signs of over supply that have characterised other property booms. Therefore whilst income investors are quite happy to take the 6% available on their building society accounts at the moment, income investors looking at this time next year may want to pay attention to HSBC's Chief Economist who warns that interest rates could fall to as low as 4.5% by the start of 09. This all means that the hefty 6%+ interest that depositors are obtaining now will be a thing of the past.
The same fate will not befall income generating property shares. In fact the opposite is likely to be the case, falling interest rates will be good for property companies cash flow meaning more cash to make dividend payments. Falling prices means rising yields for those companies who are still investing. This means that the net income from property is also on the rise.
Income investors should ride out the storm in the credit markets to secure a long-term rising income stream.
The UK's economy is clearly going to hit the buffers in 08. Commercial property is overvalued probably in the order of 10-15% and this situation will unwind during the next year. However, the fundamentals of investing in property are still strong for income seeking investors. With discounts in some income generating property companies running at near 50% there is plenty of scope for a fall in the underlying value of their property assets and still for an income investor to buy property assets at a discount.
The good news for income seeking investors is that rental incomes on property is fairly secure and with no immediate signs of over supply that have characterised other property booms. Therefore whilst income investors are quite happy to take the 6% available on their building society accounts at the moment, income investors looking at this time next year may want to pay attention to HSBC's Chief Economist who warns that interest rates could fall to as low as 4.5% by the start of 09. This all means that the hefty 6%+ interest that depositors are obtaining now will be a thing of the past.
The same fate will not befall income generating property shares. In fact the opposite is likely to be the case, falling interest rates will be good for property companies cash flow meaning more cash to make dividend payments. Falling prices means rising yields for those companies who are still investing. This means that the net income from property is also on the rise.
Income investors should ride out the storm in the credit markets to secure a long-term rising income stream.
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