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The first interest rate cut this year has already been made and more are expected. I think you are sure FTSE Stocks can benefit from this, especially in the real estate sectors.
Inflation and high interest rates have hurt the sector in the past few years, with stock prices falling sharply. But now that things are looking up, there may be good opportunities here.
Two stocks I'm passionate about are Tritax Big Box Reit (LSE: BBOX) and Places to stay in Great Portland (LSE: GPE). And I'm not alone – they've both recently been hit with Buy from a great seller Goldman Sachs.
Like real estate investment trusts (REITs), 90% of their profits must be returned to shareholders under UK law. This makes them good options for equity investors looking for a steady stream of income.
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That's why I think these two assignments should be considered.
Tritax
Tritax Big Box is a REIT that specializes in large logistics facilities, known as big boxes. It focuses on providing sustainable income by investing in high quality assets with positive growth potential.
With a market capitalization of £4bn, it is one of the largest stocks FTSE 250. This year it returned to profitability, and revenue will grow by 28% annually going forward.
If growth occurs, it may join FTSE 100 in the next reorganization of the list. That could result in a huge increase in the share price.
It has been paying and increasing dividends consistently for 10 years, with only a small decrease in 2020 amid the pandemic. Naturally, a critical situation like the economic one can lead to additional risk reductions that should be considered. In addition, its dividend per share is greater than its earnings per share (EPS), so it has a payout ratio of 83%. If that approaches 100% it may result in a dividend cut.
Currently, its 4.6% yield is attractive so I think it would make a good addition to my equity portfolio. I plan to buy shares at the end of this month.
Greater Portland
Great Portland Estates is another REIT that develops properties in central London, including ready-to-estate and fully managed properties.
Over the last few years we have seen a decline in London's demand for office space. As such, GPE has struggled to fill some of its properties. The company reported a loss of £307.8m earlier this year but is expected to return to profit next year.
In May this year, it announced plans to raise £350m to fund new rights issues. It believes the market downturn is over and expects demand for London office space to pick up.
The share price has increased by 10% in the last six months. However, global markets remain sensitive, especially in the US where uncertainty about rate cuts has led to slower growth. If another 2008-style situation emerges, the local market could take a big hit.
This leaves me worried about investing too much in this industry. While I think GPE shows decent growth potential, I would hold off on buying the stock right now. If I see any more signs of demand for Central London office space, I will look at it again.
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