FTSE 250 Stocks: Growth Over Dividends, But One Exception Yields 6.1%
The FTSE 250 index companies are often viewed as mid-cap and small-cap firms focused on growth rather than paying high dividends. As a result, FTSE 250 stocks are not typically popular among investors who prioritize yield.
However, there are exceptions to this trend. For instance, one FTSE 250 stock is currently yielding 6.1%, considerably higher than the average yield for the index. Moreover, according to analysts, this particular stock is also exhibiting signs of continued growth, making it an attractive option for investors seeking both yield and growth potential.
Businesses linked to e-commerce are not immune to economic downturns and may experience significant challenges as consumers cut back on spending. Furthermore, the rising interest rate environment can also impact e-commerce-related businesses. For example, warehouses, which are essential components of the e-commerce supply chain, may experience sharp declines in value as interest rates rise.
Warehouse REIT is a company that specializes in warehouse operations and management. However, like many other businesses tied to e-commerce, Warehouse REIT has experienced significant challenges over the past year.
In particular, the economic downturn caused by the war in Ukraine has led to a 30% drop in the company’s stock price. At the same time, the company faces further distress from the hawkish comments from Jerome Powell in the previous week.
Despite these challenges, Warehouse REIT’s management remains optimistic about the future. They are changing focus to acquiring and renovating dilapidated properties in prime locations, which they believe will be attractive to e-commerce businesses.
In their latest financial report, Warehouse REIT reported an increase in occupancy rates to 92.7%, up 1% from the previous year. This increase in occupancy is likely due in part to the company’s average leasing duration, which stands at a robust 4.4 years. As a result, the company’s cash flow avenues remain solid, and they are well-positioned to weather ongoing market uncertainty.
Warehouse REIT’s management is so confident in the company’s prospects that they have raised the quarterly dividend from 1.55p to 1.6p per share.
While warehouse REITs’ tenants may be obligated to make rental payments, there is always the risk of default, particularly during economic uncertainty. The 2008 financial crisis is a stark reminder of the potential risks of investing in real estate.
During that period, more than 70% of the US population was paying over 30% of their income in rent, which led to a surge in defaults.
If a recession materializes, this could lead to a significant drop in the company’s share price. However, for investors willing to hold on through a potential downturn, there may be an opportunity to benefit from the company’s strong dividend payouts.