Income Monkey

Income generating property shares could be ripe for recovery

2009-08-11T07:29:00.001+01:00

Anybody who has invested in income generating property shares will identify with comments made by Chris Turner at the end of 2007.

Not in my lifetime have we seen an asset bubble deflate so quickly and so devastatingly for many investors who had staked their livelihoods and pensions on the safety of income generating shares invested in bricks and mortar.

These shares in many cases are standing at a fraction of their values several years ago as these income generating property shares have had their loan covenants tested and in many cases breached by the dramatic fall in property asset valuations.

However, in the last couple of months stability has returned to some of the lower geared income generating property shares suggesting that the time to once again look at these shares as a way of generating a healthy income through a robust dividend stream may well be right.

I particularly like some of the PITs or Property Income Trusts. These shares predated the more heavily regulated and larger REITs sector and some which over geared have seen share prices savaged and dividend income obliterated. However, there are some which were conservatively geared have continued to pay very health dividends approaching 10%. With an expectation that asset prices are finally stabilising it could be a good time to go in search of some income generating bargains.

My favourites and ones which I all have a personal shareholding in are:

F&C Commercial Property Trust

Launched 2005
Total assets £964m
Gearing 23.8%
Largest three properties St Christopher’s Place Estate, central London; Newbury Retail Park, Newbury; and Cassini House, central London
Sector breakdown 44% offices, 25% retail, 20% retail warehouse, 10% industrial, 1% shopping centre
Chairman Peter Niven, former chief executive of Lloyds TSB Group’s offshore banking operations (Data as at 30 eptember 2008)

ING Real Estate Income Trust

Launched 2005
Total assets £434m
Gearing 47.2%
Largest three properties Unit 5320, Magna Park, Lutterworth; Units A-F3 and G2, River Way Industrial Estate, Harlow; and Phase II Parc Tawe, Swansea
Sector breakdown 48% offices, 29% industrial, 12% retail, 7% retail warehousing and 4% leisure
Chairman Nicholas Thompson, former head of fund and investment management at Prupim and present director of the Lend Lease Retail Partnership (Data as at 31 December 2008)

Standard Life Property Income Trust

Launched 2003
Total assets £167.5m
Gearing 38.9%
Largest three properties Hollywood Green, London; Clough Road, Hull; and Ocean Trade Centre, Aberdeen
Sector breakdown 35% industrial, 30% offices, 22% retail and 13% others
Chairman Sir David Christopher Moore is an advocate of the Royal Court of Guernsey (Data as at 31 December 2008)

UK Commercial Property Trust

Launched 2006
Total assets £643m
Gearing 0%
Largest properties The Parade, Swindon; 5/7 Chancery Lane, City of London; and Great Lodge Retail Park, Tunbridge Wells
Sector breakdown 52% offices, 10% shopping centres, 9% retail, 11% retail warehouses, 18% industrial
Chairman Christopher Hill is chairman of Close Fund Management Portfolios II and Investec Capital Accumulator Trust (Data as at 30 September 2008)

I have been particularly impressed by companies like ING which have despite being quite heavily geared managed to sell property in a difficult market to enable them from breaching their covenants and still return quickly to paying a dividend demonstrating their commitment to the goal of sustainable income generation. Most recently the shares which currently trade at a little over 43p have an asset value of 49p in July. The company has restarted paying a quarterly dividend of 1p which puts the shares on a yield of 9.3%. After a strong recent run up in price from 30p I would look to pick them up at around 40p or a 10% yield.

There are still attendant risks of buying any property income share at the current time. The risk is now not so much about asset price falls but a squeeze on the income generating ability of the companies as occupiers fail to pay rents and voids rates increase. On the upside if inflation does take hold then property, particularly highly geared property is the perfect hedge.

Income shares to buy - wrap yourself in British Polythene!

2009-08-07T07:22:00.000+01:00

With share prices still at very low levels. There are some interesting high yielding shares out there. The big concern is how sustainable the dividend is. Will the companies dividends be cut as company profits come under strain and try to rebuild their over leveraged balance sheets.

In my own portfolio I have a number of high yielding shares. One of the income generating shares I'm a fan of is British Polythene. Its not sexy but old BPI has been banging out solid dividends for years. The share price currently is just shy of £2 and the most recent interim statement talked about profits being comfortably ahead of expectations.

The shares currently trade on a projected yield of 6% with a projected dividend of 11.25p for the year. This is over twice covered by projected profits. If the economy does start to turn up then there is every chance that dividends will also be increase pushing the adequate yield even higher. Recent dividend payments have been as high as 22p for several years which at the current price would generate a double figure yield for income seeking investors.

Making additional income out of a renting a parking space?

2009-08-06T07:05:00.000+01:00

Have you got a spare parking space or garage? Renting out these spaces can be an ideal way of making extra income according to a recent article on Property Hawk.

You don't have to be a landlord to let out your parking space or garage. Anybody can do it and make anywhere between £50 month up to £313 month in Mayfair just by letting out an unwanted space. It all helps to generate a little more residual income.

Whats income will I get from my West Bromich BS PIBS

2009-08-05T08:48:00.002+01:00

Holders of West Bromich BS PIBS who would previously have expected a 6.15% coupon rate or 6.15 pence for each PIB held will now receive less as a result of the recent rescue. They will receive just 1.5% for the half year. The new PPDS will then receive 25% of any future net profits. For a summary of this income investors will find this article in the Telegraph useful. For a full but slightly confusing outline of how the new regime will work have a look at the West Bromich BS website.

Earn income through investing in Litigation

2009-08-04T07:27:00.000+01:00

A team of former lawyers is bringing a new asset class to investors with the launch of a closed-ended fund investing in litigation cases.

Therium Capital Management (TCM) expects its Therium Fundco investment company to be listed on AIM in August.

Therium Fundco intends to fund legal cases with a minimum cost of £100,000 and a maximum of £5 million per case. It is targeting an average return of 250% of the original investment in each case.

The fund managers have already provided funding for one case, which TCM said has been settled at its return target.

The trust will also invest in after-the-event insurance to create an income source. The insurance provides cover for legal costs in the event the claimant loses a case.

Therium Fundco has a projected dividend yield target of 5% and has a five-year life before it converts into a run-off vehicle. It will also levy a performance fee of 12% subject to NAV growth in excess of 6% a year with a high watermark.

For a full report on this product see Citywire.

How to gain an income from asian property

2009-08-03T22:12:00.000+01:00

For those income seeking investors they should check out Asian REITs according to a recent article in Money Week. Real Estate Investment Trusts are property investments which guarantee to pay a high proportion of their profits in dividends giving them a relatively high dividend yield. Despite powering ahead some of these REITS still offer close to a double digit yield. One income generating opportunity that warrants further examination.

PIBS investors recovering their nerves

2009-08-01T08:47:00.000+01:00

Anybody investing in PIBS were recently stunned by the events at the West Bromich BS where the bond holders were effectively forced to be come shareholders to save the building society.

The knock on effect in the PIBS market was rapid and profound with many investors running for the door at the prospect of their nice safe income generating investment being threatened.

Analysing the effects using the selftrade website which shows daily updates of PIBS prices.

The figures show that the weakest building societies had the values of their PIBS decimated as investor ran for the door. However, in recent weeks PIBS prices have started to stabilise as confidence returns to the market. In the last month the Coventry 12% PIBS has recovered by almost 30%. Despite this recovery it is still almost down by 25% over the last year.

West Bromich BS PIBS to become PPDS

2009-06-20T10:03:00.000+01:00

The Telegraph reports that holders in PIBS will see them converted to PPDS or Profit Participating Deferred Shares.

It is anticipated that the new shares will pay an annualised income of 3%.

PIBS safe so far......

2009-02-15T07:03:00.000Z

Anybody considering investing in a PIBS or PSB first acts how safe is my investment. Will I continue to receive my coupon / interest payments and should the bond be redeemed will I receive my capital back.

Well so far no bank or building society has failed to pay their coupon and no PIBS have been defaulted on. But we are living in extraordinary times and with the government owning several of the minor former building societies then the future is uncertain. The conflicting consideration for income investors are:

1. This government have shown them to be less than consistent or principled when dealing with financial markets and are quite prepared or able to act incoherently often without realising. This makes the chances of default a real concern.
2. The sums involved are microscopic compared to the scale of government investment in the banking sector. Is it worth the government confronting controversy of defaulting on a loan for say £20million in the case of Northern Rock PIBS. Logic would say no but as it has been said before.

We are living through extraordinary times.

PIBS in nationalised or part nationalised banks

2009-02-14T15:20:00.000Z

One of my questions since discouvering PIBS is what is going on with the PIBS or Perpectual Subordinated Bonds PSB as the pibs are banks and former building societies are technically known as.

I recently came across the website of the UK Shareholders Association which explains very clearly what is happening in respect of the PSBs relating to the different banking organisations affected by the current crisis.

1. HBOS & LLOYDS bondholders are currently safe and will be part of Lloyds financing
2. NORTHERN ROCK has been nationalised and refinanced. It is reducing its mortgage book prior to a probable eventual sale. PIBS are continue to receive interest. If the Government fail to find a buyer the bank would be wound up and importantly PIBS holders would receive payment before the Governments loan is repaid.
3. BRADFORD & BINGLEY continues to pay the interest on their former PIBS. However subordinated debt such as the PIBS ranks behind the governments debt.There is therefore a possibility of there being no capital left in the bank following the Government’s and FSCS’s charges for the interest and capital repayments which would arise over many years of funding B&B. This would mean that bondholders would be wiped out as would the shareholders of B&B. Only if there is any capital available to repay bondholders would the subordinated bondholders be repaid their capital at the par, face value, of the bonds.Under the terms of the current Treasury order there may be little hope of the money being made available to make interest payments long term and this is reflected in the current price of the bonds.

I'm therefore going to give Bradford and Bingley a wide birth even if the current yield at over 40% looks very tempting.

Best source of pibs info

2009-02-13T22:15:00.000Z

I've just found a great new source for PIBS information. The site is called fixed income investor and it gives up to date data on PIBS prices, graphs and yield analysis. There is also some editorial comment on some of the PIBS. This recent article on the Nationwide 7.25% PIBS is very complementary but this PIBS only yields 7.5%. Personally, I'm looking for nearer double digits. Thats why I plumped for my first holding in the West Bromich BS 6.15% at 60p it just about does a double digit yield.

I'm just hoping that the managers having being investing in too many toxic assets over their in the Black Country such as loaning money to the struggling local footy team West Bromich Albion.

Where to get up to date PIBS prices?

2009-02-08T19:09:00.000Z

Where can I get up to date PIBS prices?

There are several sources I find useful. Online you can go to a PIBS price chart in thisismoney the online part of the Daily Mail. Alternatively you can go to Collins Stewarts website and download their up to date table on PIBS PRICES

For those more traditional income seeking investors who like to stay non digital try the FT WEEKENDS Money sections DATABANK. PIBS prices here are updated weekly.

All these prices are only updated weekly so for a real time update you will have to phone your broker.

PIBS - first purchase

2009-02-08T18:34:00.000Z

I finally took the plunge last week. I bought 2500 PIBS in Britannia 5.5555% PIBS (call 14/12/2015)at 60p which should give me a gross yield of around 9%. Not bad I thought. A bit of drama arose when I received a call from my stockbroker TDWATERHOUSE a few minutes after my purchase informing me that purchases could only be made in 1000 unit lots. I plumped for 3000 given that a 9% yield was just tooo juicy to resist.

Why Britannia? Well having just agreed a merger with the COOP I figure they were a pretty safe bet not to go bust.

I will be looking at topping up my holding in PIBS over the coming weeks and will keep you updated with my next purchase.

PIBS income generating opportunity

2009-01-12T19:16:00.000Z

Savers and income seeking investors should take a look at this income generating option.

For anybody that was stunned by the recent scare over the financial health of some of most respected banks and financial institutions we are suddenly aware that even what were seen as risk free deposit accounts with banks and building societies are not completely risk free. If those financial institutions go bust then their is a risk that you as a saver may lose all or some of your savings. Thankfully, the Government recently increased the amount of a savers savings that are guaranteed to £50,000.

Are you prepared to risk a PIBS?

Therefore savers and investors who are prepared for a bit of risk may want to consider what are called PIBS or Permanent Interest Bearing Securities. n the very unlikely event of a building society getting into financial trouble, it can miss paying interest on PIBS. If the society became insolvent the PIBS holders would be last in the queue to get their money back. All the other investors would be paid first, and only if there was sufficient left would the PIBS holders be repaid. Also, unlike other building society investors, PIBS holders are not covered by the Financial Services Compensation Scheme. So far no building society has failed to pay interest when it falls due. However, the recent debacle with former building societies which have been taken over by the government have illustrated the potential risks that holders of PIBS face. In the case of Northern Rock PIBS the government has continued to pay the coupon or interest whilst for Bradford & Bingley the situation is less clear. Check out this article on these PIBS for some up to date info.

So clearly there are some risks attached to buy PIBS but what about the returns?

Currently the best rates available on fixed rate PIBS are a stratospheric 30% but this is on the Bradford and Bingley PIBS where there is considerable debate over whether the coupon will be met this January. Interest or the Coupon as it is known is paid twice a year.

More typically PIBS yield between 7-10%. Given that interest rates for many savers are nearer 1% than 10% this is looking very attractive, especially for what up until recently were considered very low risk investments. I'm going to be looking at several PIBS for inclusion in my own income generating portfolio and will go through the selection process in future posts. At the moment the best place to get an overview on yields is the FT weekends Money supplement or go to Collins Stewart website. Remember PIBS which are traded on the LSE prices will vary daily in the same way as shares.

How do I buy PIBS?

are traded on the London Stock Exchange (LSE) in much the same way as equities.

Market makers will quote a firm two-way price on the LSE dealing screens, though there is a limit to the size in which they are obliged to deal at these prices.

The spread between the bid (the price at which you can sell) and offer (the price at which you can buy) and the quantity at which the quoted prices are firm will vary from stock to stock.

The stockbroker executing the business for you will be able to give you the specific details for the Pib you are looking to deal in.

No stamp duty is paid on purchases of Pibs

Other info about PIBS

Former building societies including Halifax and Cheltenham & Gloucester can also issue Pibs and currently do so, although these are referred to as PSBs (Perpetual Sub Bonds).

You do pay income tax on Pibs, but you can shelter them in a tax-free Isa. Many of the Pibs have very long redemption dates while some don't have any redemption-dates. If you invested in Pibs this would make you a member of the society. They act much like bonds, so are not risk-free. So, if interest rates are rising their price will fall.

Need to know more about PIBS or have a comment about investing in PIBS post a comment below

New year income generating investments

2009-01-11T17:12:00.000Z

After a calamitous 2008 where putting my faith in highly leveraged income generating investments. This clearly was a big mistake.

I was not the only income seeking investor that fell foul of this mistake given the fall in the numbers and fortunes of many of the worlds billionaires. However, in 09 with my meagre pile much depleted I am determined to pursue much less risky income generating options. Lets hope that 09 is far more successful. In many ways it couldn't be less so.

Income seeking investors who watched this week with horror as UK income seeking investors were confronted with the reality that interest rates in the UK have hit an all time low of 1.5%. Many income seeking investors are now confronted with deposit rates in the UK of less than 1%. My interest rates on the various esavings accounts I hold such as my Natwest and First Direct are now at 1.3 and 1.75% AER. I'm therefore looking at alternative fixed rate saving accounts anticipating that interest rates and therefore deposit rates are likely to fall further in 09.

Having studied the financial press such as the FT it seems like I'm going to be hard pressed to get any more than 5% from a fixed savings account. Moneyfacts has shown me a table of the best fixed savings rates around. Not wishing to tie my cash up for more than a year. I think interest rates could rise rapidly in 2010 as all the liquidity being pumped into financial system turns the spectre of deflation into rampant inflation. I am therefore looking at going for the Anglo Irish Bank's 4.6% Fixed Rate Bond. I understand that this is guaranteed by the Irish government. Any more information from readers would be appreciated before I put my trust in our Celtic cousins.

Mapeley update

2008-03-29T17:20:00.000Z

Fellow Income Monkey's that have been following the prospects of Mapeley are probably already aware of the fact that the recent talk over talks came to an end with the announcement on Friday morning. Unsurprisingly the market reacted by marking down the stock heavily from its closing price of £15.57 to £13.21.

Credit crunch
Both the Times and the FT reports that the collapse of the talks were down to the fact that Fortress Investment Group the majority shareholder with over 50% of the share capital were thwarted in their attempt by the conditions in the American money markets.

My reaction
Relief! The biggest risk to me as an income investor was that Mapeley was taken out cheaply as a result of an opportunist bid only successful because of the poor sentiment toward property companies. My reaction was to immediately go back into the market a buy shares. I had taken advantage of the bid to book some short term profits and unwind a significant CFD position. This enabled me to go back in and crank up my holding at a lower average price.

Focus on income generating fundamentals
The latest preliminary results for the year to the end of 2007 showed income investors just what they wanted to see. All the metrics relating to income were up:

Dividends up 11.9% to 188 pence per share (2006: 168 pence

- FFO up 23.4% to £56.4 million (2006: £45.7 million)

- EBITDA up 23.4% to £115.4 million (2006: £93.5 million)

- Revenue up 8.4% to £417.4 million (2006: £385.0 million)

This all means that dividends which were up 11.9% from 188 pence per share (2006: 168 pence). At the current share price this dividend equates to just over 14%.

The most important metric out of these figures is the FFO. This effectively measure the free cashflow and therefore the amount a company can pay in dividends. Mapeley figures show that FFO is up to £56.4 million or 192p a share. This enabled them to pay the 188p dividend out of existing income making the whole process very sustainable.

Paradoxically one of the reasons that the City has been marking down Mapeley is because its investment portfolio is heavily office and regionally based. These provincial properties are perceived rightly to be more of a risk of value reductions. However, as the Times commented that Mapeley is protected from a potential slump in demand for commercial property by the fact that a majority of their tenants are in the public sector (over 60% is let to the public sector tenants). These are just the low risk tenants who going into a economic slump are the ones you need because they are less likely to miss rents or be unable to pay.

Income Monkey Recommendation
I still think that Mapeley has a bright future. The big risk on the horizon is that Fortress are just stalling their time in making the bid in the hope that the market still responds to lack of confidence the share price by launching a secret bid at the right time. For more views and discussion about Mapeley go here

Crazy Crazy Market!

2008-03-19T20:47:00.000Z

If you said to me a couple of months ago that I would be able to get a 10% yield on solvent, asset backed businesses with growing incomes then i would said you were crazy. We live in extraordinary times.

The credit crunch as well as sucking confidence from the market has also robbed it of any sense.

There is no doubt that the rapid removal of credit from the international financial markets will effect companies prospects but a melt down? Fear and uncertainty has taken hold and investors have run for the door. These are times when income investors can pick up a steal which they can hold for a lifetime and will reward investors handsomely. Here is just a small selection of some great high yielding shares to buy & why.

DAWNAY DAY TREVERIA (DTR)
I've been busily filling my boots with this stock for sometime. For Income Monkeys looking at avoiding the down turn in the UK commercial property market. They should consider Dawnay Day Treveria. This company is focused on investing in income generating German retail property. Launched in December 2005 the company has now completed its objective of having a portfolio of euro 2.3 billion. The company's share price has been hit by the down turn in sentiment towards property assets.

The dividend for 07/08 is projected to be 5.05 cents rising to 7 cents in 08/09equating to a projected 11% yield on its current share price of 64 cents. These levels of dividend are easily affordable from its rent roll of 59,319,000 euros for the 6 months ended 30 June 07. After expenses and interest net revenue should be approximately 42 million euros for the year before tax. This is enough free cash to pay up to a 6.6 cent annual dividend. The company's share price is easily covered by its' net assets. It had a NAV of 116c back in June which means the property income stock is now trading at over a 30% discount to its current share price. Too high for a company investing in a property market that has not seen the excessive over valuations experienced in the UK and therefore it is on a much firmer footing. With a growing revenue stream leading to a potential rising dividend, this looks like a great income generating stock to hold.

Price 64 cents Projected yield 11%

MAPELEY (MAY)- success!
Well we don't like to boast but we did tell you so. Mapeley a share that this blog has mentioned continuously has plumbed the depths over the last few months but has recently rebounded as a result of a potential bid which saw its price soar. Mapeley's latest results just vindicate what we have being saying all along. Mapeley is a thoroughbred cash machine throwing off income and dividend payments.

Mapeley is a classic case of the City not understanding a company. Mapeley is a hybrid which has confused the City. It is partly property investment company but mainly an outsourcing company deriving much of its income from managing other companies property requirements. The result is that it generates much greater levels of income than traditional property investment companies.

The latest results for year ended 31 December 07 show:

dividends up 11.9% to £1.88
FFO up 23.4% to £56.4 million
EBITDA up 23.4% to £115.4 million

On there current share price of just over £15 the yield is a massive 12.5%.
The main downside was the fact that as a result of the fall in commercial property values Net Asset Values were down to £18.62 from £24.23 a year earlier.

This prices at a discount to asset value of 20%. However as Citi property analyst Harry Stokes observes Mapeley should not be valued as an investment company

"We use enterprise value/EBITDA because we consider property outsourcing an earning play, not a property play" he said.

This all means that you have a company with a cast iron and rising income stream, most of its properties are let to government or the Santander Bank (formerly Abbey). The company is paying a whopping and rising dividend and trading at a discount to underlying asset values into the bargain.

The worry is that short term jitters means that the majority shareholder and current take over interest Fortress will get away with underpaying for this great income stock should they decide to press forward with a full bid. Logically this company should be worth £25-30 on its income generating capacity, growth prospects and recession proof business model. However, since when have markets been rational?!

Price £15.07 Projected yield 12.5%

PROSPECT EPICURE J-REIT (PEJR)
PEJR is another example of an unloved stock in an unloved sector. This company originally floated in November 2006 at £1 was a £100 million in has been set up with the purpose of investing in Japanese REITs. This stocks like UK REITs invest in a variety of Japanese real estate and in return for preferential tax treatments are required to pay out most of their incomes to shareholders in the form of dividends.

The Japanese property market has been in a slump since the early 90's and was until the recent 'credit crunch' showing signs of life . The Japanese market like the German property market are amongst the best investment opportunities having missed out on the global boom in values experienced over the last 5 years.

Why invest in PEJR? Well if you believe in value investing and investing for income this stock is a must. The shares are now down from their 52 week high of and trade just of their lows. The most attractive thing about them are the investment fundamentals.

Prospect Asset Management, Inc., the investment adviser to the Company believes that low vacancy rates and limited supply of property,combined with robust demand are pushing rents higher. This provides strong fundamental underpinning for real estate capital values and rental yields. They note that some J-REITs are trading at discounts to stated book value as high as 48.7%, and some have yields of up to 9.9% p.a. The Investment Adviser believes that this discount to stated book value may be expected to narrow due to a shift in the attitude of J-REIT underwriters toward consolidation. PEJR estimates that the Company's current portfolio holdings are trading on a 36.8% discount to their net asset value.

Low interest rates om Japan - BOJ rate at 0.75% is practically zero means that finance costs are very low so this leveraged fund can borrow for very little and then invest in J-REITs yielding in the high single figures. The result is that they can afford to pay high dividends. The O7 dividend should total 6.5p which on its current share price of just over 50p means a whopping dividend of over well over 10%. This added to the fact that the companies ad visors announced earlier this month that they were about to embark on a placing to raise an additional $100m of funds to raise their investment in the sector. Most encouragingly this appears to be prompted by existing institutional investor demand who have expressed a firm commitment to take over $50 million of these new shares themselves. The main risk to investors is the currency risk as funds and income are derived in Yen.

Price 53.75p Projected yield 12%

Apologies - but new income generating share to watch!

2008-01-27T21:56:00.000Z

Firstly, I would like to apologise to fellow Income Monkeys for my lack of postings over the last few weeks. Pressure of work being the editor of the fast growing buy-to-let website Property Hawk and trying to keep up with the Stock market in the fast moving & volatile conditions have kept me too busy to allow for me to keep Income Monkeys up to date with the latest developments & there have been plenty:

Anybody who took our ongoing advice about buying into commercial property shares might have just got in before the rush. The papers including the Financial Times have been full of stories over the last few weekends about how sentiment towards commercial property shares is just about to turn. The latest developments have been the talk of property vulture funds which are likely to herald a whole raft of takeover activity and speculation after February when they first start to appear.

The Income Monkey has already made several income generating share tips see previous postings on which income generating property shares to buy.

The bank have also had a rocky ride with the fall out in the sub prime market but again some kind of stability may have returned.

Those Income Monkeys that took my advice and bought Northern Rock PIBS rather than the shares should be showing a healthy capital profit and potentially with a semi private public rescue now proposed by the Government could be in line for a very healthy income over the next few years.

Retail stocks have been hammered, but whilst there is a likelihood that dividends on these shares could be cut in the short term those Income Monkeys that are prepared to take an 18 month view on these shares could start to see an improving situation and a recovering dividend yield and ultimately a good long-term investment opportunity.

So that’s the past but what about new opportunities. One income generating investment opportunity that has caught my attention and one that I have already have a holding in is Northern European Properties (NEPR).

Northern European Properties Limited is a Jersey incorporated company which invests in real estate opportunities in the Nordic and Baltic Regions and Baltic Russia. The company has been listed on AIM, a market of the London Stock Exchange, since 15 November 2006. As per December 18, 2007 the company is listed on Euronext Amsterdam in addition to the current AIM listing.

The company has a strong income bias in that it is committed to paying 90% of its FFO - Funds From Operations (A figure used by real estate investment trusts (REITs) to define the cash flow from their operations. It is calculated by adding depreciation and amortization expenses to earnings, and sometimes quoted on a per share basis)

NEPR now valued at 385 million euros is mainly invested in Sweden and Finland although it sees substantial opportunities in Russia and has just started to acquire properties in the area which should yield far more than their portfolio in the Nordic countries.

The share price has been hammered by the sentiment toward property companies shares and now stands at 0.81 euros just above the year low of 0.64 euros but well of the high of 1.31 euros. The interesting thing is that the company has recently agreed several large disposals in the Swedish and Finnish part of its portfolio which will give it substantial funds to either take up opportunities from overstretched investors or to return substantial funds to investors or both. All this is potentially good news for income seeking investors.

The other interesting thing is that one of the non executive director investors Ian Livingstone a non executive director clearly things that the shares are undervalued. He has purchased 3 million shares on a CFD (so he is borrowing money to purchase them) during the last week. To my mind if a director and one with the track record and experience is confident enough to put £2 million of his own cash on the line, then I'm happy to put a few grand into NEPR. Other Income Monkeys might also want to follow suit.

I hope that the next week sees more vindication of the new paradigm of investing. Remember fast buck capital growth is dead. Its all about the income. Get that right and the capital growth will look after itself.

Finally a request. Any Income Monkeys with income generating ideas of their own, please feel free to share them with the rest of us. Any genuine income generating tips featured will be rewarded with a organic Income Monkey banana signed personally by my own fair hand. So what are you waiting for.....

Property investment expert comments

2007-12-23T20:33:00.000Z

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.

"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."

Crystal ball gazing for 08

2007-12-19T12:42:00.000Z

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.

DDs for dividends

2007-12-06T20:08:00.000Z

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.

"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.

Investment income gem

2007-12-03T20:58:00.000Z

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

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.

Why to buy high yield property shares

2007-12-02T17:05:00.000Z

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.

mapeley capitulation

2007-11-27T19:17:00.000Z

For those income investors who have been following Mapeley shares its been a traumatic ride over the last few months. Even when a share is good value by any common sense measure it is frustrating when the markets have a downer on it and there is nothing an individual investor can do but hang on for the ride.

Today just after 12 the market sentiment finally changed. If income investors want to study the intraday graph for the 27th november they can see that during the morning the share price after an initial recovery resumed its inexerable journey south. that was until it hit £12.20 just after mid day. At this point the share rocketed upwards to over £13 and then recouvered further to end just a couple of pence down on the day at £13.32. This to me signals a strong point of resistance. I cant see this income share going below £12 and income investors should look for this share to find a trading range between £12.75 and £13.50 before starting a slow recovery

3 income property stocks to buy

2007-11-25T19:39:00.000Z

I've already warned income investors of income generating property stocks that may proove to be fools gold.

So what should income orientated investors buy?

Here are three stock that income monkeys could look at and should provide a handsome income and a solid investment.

Close High Income Properties
This UK specialist investment company was set up by Close Brothers Bank bank in 2003 with an offer of 50 million shares priced at £1. The portfolio comprises of industrial property which is not as sexy as some of the sectors such as retail and offices. However, the good news for Income Monkeys is that as anybody that yields on industrial property are higher than other sectors meaning that a portfolio of industrial property can return much higher incomes.

The current dividend is 8.5p which on the mid price for the stock gives a yield of 11.5%. Unsustainable you might say. Well no. Careful inspection of the latest interim report published on 25th September reveals in the consolidated income statement that the company generated net cash of just over £5.5 million before financing. Interest payments and other finance charges accounted for just over £2.8 million leaving approximately £2.7 million in free cash to fund dividends. The costs of funding a dividend of 4.25p for the half year on the 77 million shares in issue come to about £3.3 million. Therefore the dividend is not quite covered but with a little bit of financial engineering or cutting of fees it should be sustainable. Investors may be also comforted by the Chairmans statement in the Interim Report released in September reiterating the dividend target of 8.5p.

The latest net asset value revealed NAV of just under 120p which means that it is currently trading at a 38% discount to its underlying share price of 74p. The downside with this share is the ridiculous spread between the buying and selling price which is over 10% meaning its not a share for short term speculation.

Dawnay Day Trevaria
For income monkeys looking at avoiding the down turn in the Uk commercial property market. They should consider Dawnay Day Trevaria. This company is focused on investing in income generating German retail property. Launced in December 2005 the company has now completed its objective of having a portfolio of euro 2.3 billion. The company's share price has been hit by the down turn in sentiment towards property assets.

The projected dividend for this year is 4.59 cents rising to 5.87 cents in 2008 equating to a 7.2% yield on its current share price of 81 cents. These levels of dividend are easily affordable from its rent roll of 59,319,000 euros for the 6 months ended 30 june 07. After expenses and interest net revenue should be approximately 42 million euros for the year before tax. This is enough free cash to pay up to a 6.6 cent annual dividend. The company's share price is easily covered by its' net assets. It had a NAV of 116c back in june which means the property income stock is now trading at over a 30% discount to its current share price. Too high for a company investing in a property market that has not seen the excessive over valuations experienced in the UK & therefore is on a much firmer footing.

Mapeley
For investors not spooked by a slightly different business model should consider Mapeley. This company is not only a property investment company but is an outsourcing business which means that it has long-term contracts with large organisations to look after all their property & accommodation requirements. This means that not only do they receive rent from their tenants they also earn regular fixed fees for taking on this role.

Mapeley's share price has slumped from a high of just over £40 early this year to a low of £13.20 last week. Currently the shares are trading at a little over £14. This puts them on a massive yield of over 13% forecast to rise to 13.8% next year. With a rock solid set of tenants including the Government and Abbey National and several large outsourcing contracts their income seems assured. The market seems to be marking them down savagely because of concerns over the future of the UK commercial property market. With latest net assets of £22.78 per share according to the 3rd quater results published in November. The current market capitalisation now values the company at £421 million putting them on a discount to net assets of 37%.

The most important thing is cashflow. The consolidated income statement reveals that net revenue was a little under £100 million for the nine months ended 30 September 07. If admin expenses of £14.5 million and then net finance costs of £59.3 are taken off this leads net cashflow of £26.8 million. This is somewhat short of the £41.4 million needed to fund the expected dividend payment and therefore casts doubts on its' long-term sustainability. However, it still leaves just under £36 million free cashflow annually for income investors or £1.21 per share. This still equates to a very healthy 8.7% yield on a share price of £14 and their is always the chance that the company holds to dividend in anticipation of rising rental incomes.

INCOME MONKEY VERDICT
Income investors should read the previous post about fools gold. A little careful digging through the consolidated cashflow statements of these property companies has revealed some real income gems. Don't forget to come back to read about more income investing opportunities in coming weeks.