British Land(LSE: BLND) shares have lost a bit of ground since late 2015 as a bit of pessimism has been creeping into the property market -- and last year's Brexit panic didn't help. But that's making me think they're a tempting long-term buy right now, especially as nothing has changed regarding the UK's chronic housing shortage.
Wednesday's full-year results have strengthened that thought, with the property group reporting a 7.4% rise in underlying profit to £390m. A portfolio value fall of 1.4% doesn't really bother me in the current climate, especially as the second half saw a 1.6% gain -- overall it doesn't really mean a lot.
The key for me is the dividend, raised by 3% to 29.2p for a yield of 4.4% on the current 659p share price. There's also a 3% increase proposed for the 2017/18 year, which gives investors better visibility than most.
With inflation creeping up, a lift of 3% per year could well struggle to keep pace, but over the longer term I expect British Land's dividend to grow modestly in real terms. And I think we're likely to see some share price growth too -- over the past five years we've had a 33% rise, and that's an overall return of around 10% per year when added to dividends.
Chief executive Chris Grigg pointed out that markets were "stronger than many anticipated" following the EU referendum. I see Brexit as having no real long-term effect on British Land's profitability, especially as the company appears sufficiently flexible in catering to changing demands -- its portfolio is almost full with occupancy at an enviable 98%.
If you want an even bigger dividend, look no further than SSE(LSE: SSE), as the electricity and gas supplier has just lifted its full-year payout by 2.1% to 91.3p per share. That might not sound like a big jump (and it's a bit below our current inflation level), but with the shares at 1,441p it represents a yield of 6.3%.
Adjusted earnings per share came in ahead of forecasts with a rise of 5.2%, providing dividend cover at 1.38 times. Cover is towards the top end of expectations, but next year it's expected to fall to nearer the 1.2 times bottom end.
SSE has been buying back shares, with £131m returned via that route, together with a further £65m in April after the end of the year. That doesn't seem to have made much difference to the share price, which has declined 2.5% over the past 12 months, but it should at least help counter the dilutive effect of offering scrip dividends.
Price cap risk
On the downside, SSE has attacked the energy price cap proposed by the Conservatives and suggests it could threaten its dividend in the future, saying it "would caution against potential unintended consequences ... in what is a rapidly changing and increasingly competitive market."
And a nationalising Labour government winning the forthcoming election would be an even bigger risk. Jeremy Corbyn has already announced plans to take control of the water companies and the national grid, and the energy firms will presumably not be too far behind. But I reckon the chances of a Labour win this time are slim.
Even with these notes of caution, SSE's yield is very big and is forecast to rise to 7% by 2019, and I'd see it as still attractive even at the 5% level.
Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.