2 great income stocks that could double their dividends

A golden egg in a nest

Although commercial and housing-focused real estate companies have fallen out of favour with investors of late, warehouse provider Tritax BigBox (LSE: BBOX) is having no such problems with plenty of interest in the company's solid growth prospects and 4.4% trailing dividend yield.

Indeed, the real estate investment trust's shares trade at a slight 2.8% premium to their 146.22p net asset value (NAV). However, I believe this is still a price worth paying for what is a great income stock that could double its dividend in the years to come.  

Management is targeting a 6.7p payout this year that would represent a slight uplift over the 6.4p paid out last year. This is a minor improvement but would still be impressive given the company issued shares representing roughly 8% of its share capital back in April to fund new the development or acquisition of new warehouses. 

In my eyes, the company is right to expand just now with the warehouse sector producing very impressive returns for companies like BigBox that own large, modern warehouses near vital transportation links. These warehouses are in high demand from traditional retailers and e-commerce players alike as they seek to optimise their supply chains to quickly deliver goods to stores and customers who are demanding lightning fast delivery.

In the first six months of 2018, increasing demand for these types of properties saw BigBox increase its rents by 2.22% on a like-for-like basis, while the addition of newly acquired properties saw its annualised rent roll rise from £125.95 at year-end to £139.36m at period-end.

With income from rents rising quickly and independent appraisers steadily increasing their estimates for the company's portfolio value, BigBox has good potential to further juice already impressive shareholder returns. Add in an attractive valuation, conservatively geared balance sheet and a great sector outlook, I think income investors would do well to consider Tritax BigBox.

All ready for take-off? 

I also see great income potential from industrial engineer Meggitt (LSE: MGGT), which already rewards shareholders with a 3% dividend yield. While it would take some time for it to double its dividend per share, I think the company can do this over the long-term thanks to its market-leading position in key areas such as brakes, wheels, sensors and engine valves for military and commercial jets.

Lately, Meggitt has invested large sums in designing products for the bevy of new jets rolling off the production line at Airbus and Boeing. This has the potential to drive significant sales, margin and cash flow improvements over the next decade or two as these planes enter service and need the high-margin replacement parts Meggitt provides.

Growth in the aerospace market as well as a rebound in fortunes for the company's energy customers, which provide roughly a third of sales, led to organic revenue growth of 9% in H1 with the company's order book bulging by 24% on an organic basis. And while margins were slightly depressed during the period at 15.8%, management boosted free cash flow due to reorganisation, and reiterated its target of 19.9% operating margins by 2021.

With sales momentum building and good potential for margin and cash flow growth, I think Meggitt has good opportunities to continue its stellar record of steady dividend hikes. At its current valuation of 14.5 times trailing earnings, I reckon it is worth exploring for income-hungry investors' retirement accounts. 

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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK has recommended Meggitt and Tritax Big Box REIT. 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.

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