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Even though the stock market is enjoying a double-digit rally this year, some of my favorite dividend stocks to buy are still on sale. Not all sectors have successfully recovered from the 2022 market correction, especially real estate which is still limping due to high interest rates.
However, with rates already cut from 5.25% to 4.75% and analyst expectations for a further cut to 3.75% by the end of 2025, the wind may change direction soon. Therefore, time may be running out to snap up asset-focused businesses at their current discounted prices. With that in mind, let’s look at two companies that I would buy some from.
Britain’s second largest commercial landlord
Despite what the name suggests, Londonmetric property (LSE:LMP) has a large real estate portfolio across the country and not just the capital. Its products are mainly focused on logistics and inventory management, which the e-commerce sector relies on.
However, through the acquisition, Londonmetric’s also gained exposure to other commercial properties used by the healthcare, education, entertainment and retail sectors.
Like some of its peers, the stock has not been a star, and high interest rates have had a negative impact on the market value of its properties. However, despite the company’s losses due to falling property prices, gross contracted rent is still rising and stands at £340m per annum, supported by 99% occupancy across its portfolio.
Therefore, budgets continue to rise. And now they are on track to achieve 10 consecutive years of growth by March 2025. Yes, business is not without risk.
Its recent purchase of the LXi has propelled Londonmetric to become the UK’s second largest commercial landlord. However, the deal also involved properties without much management experience. And if this leads to underperforming assets, shareholder value creation could be adversely affected, especially considering the £2.1bn of debt obligations.
Still, the company’s impressive dividend track record makes me optimistic.
The master of self-preservation
Another real estate business that lost its share price performance this year Safestore Holdings (LSE: SAFE). The self-sustaining business has seen its market capitalization decline by 10% since the start of 2024. As households and businesses seek to cut costs, the company has lowered its occupancy rate, which has understandably angered investors.
However, looking at recent results, the business appears to be performing much better than many of its competitors. And while overall revenue in the third quarter came in slow, international growth is firing on all cylinders despite adverse conditions. This is especially true in Spain, where year-to-date income is up 47.7%, followed by the Netherlands at 16.6%.
Compared to the UK, the European self-storage market is underdeveloped. As a result, these international operations currently comprise only 27% of the top line. But that is slowly changing. Safestore’s initial profit could bring significant long-term growth if it can repeat its historical success.
Of course, international expansion comes with additional risks. Fluctuations in currency prices can be problematic if not properly hedged. And managers will also have to navigate new regulatory and cultural environments that can hinder growth. However, with such a good track record and nearly 15 years of consecutive dividend increases, that’s a risk I’m willing to take.
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