A fall in the share price doesn’t always mean that a stock is undervalued. Yet when a company that’s in the FTSE 100 loses half its value over the course of five years, it certainly raises the question as to whether the stock is appealing to buy. I decided it was time to revisit Diageo (LSE:DGE), to see if it now makes sense to consider buying.

A host of problems

Diageo has struggled over the past few years for several reasons. One major issue has been the slowing demand after the post-pandemic boom. During lockdowns and reopening periods, alcohol sales surged as consumers stocked up and socialised more. That created difficult comparisons for future years.

More recently, weaker consumer spending (especially in Latin America and North America) has hurt sales growth. The company also warned about softer trading in regions like Latin America due to inventory issues and slowing economic conditions.

It’s also true that younger consumers may be drinking less alcohol than previous generations. The rise of run clubs and health-tracking bands helps to highlight that the next generation would rather go out for a run than hit the bar. Obviously, this hasn’t been good news for Diageo.

And finally, it simply hasn’t been a fashionable stock lately. In a market obsessed with AI and high-growth technology companies, slow-and-steady consumer staples businesses have fallen out of favour.

The value play

Right now, the stock trades on a far lower valuation than it has historically. With a price-to-earnings ratio of 12.67, it’s below the FTSE 100 average of 16.3. So not only is the stock better value than it was in the past, but it’s also good value relative to the rest of the index.

Further, Q3 results published last week easily beat market expectations. Group organic revenue jumped 0.3% for the period, beating the 2.3% fall that people were forecasting. This might not seem like much to shout about, but for a battered stock, it could be the start of green shoots emerging.

The new CEO Dave Lewis is also talking up the prospects of a strong turnaround. In the update, he said “progress on the redesign of our new strategy and the shaping of a more competitive operating framework is well under way.” After all, alcohol consumption isn’t disappearing overnight. Premium spirits remain deeply embedded in social culture worldwide, and emerging markets could still offer significant long-term growth opportunities.

Not at the top of my list

I do struggle to justify this being the best value stock in the index. I believe that while it is undervalued, the trend could persist until we get more catalysts to suggest the turnaround under the CEO is really starting to yield results. The 5.14% dividend yield provides some useful income for those who hold the stock and are waiting for the share price to rally. Yet with the risks around consumer weakness serious (and potentially long-term), I think there are other value plays that I’m more confident about investing right now.

The post Down 53% in the past 5 years. Is this the best value stock in the FTSE 100? appeared first on The Twelfth Magpie.

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• Dear Diageo shareholders, mark your calendars for 6 August
• Down 31%, how much could £5,000 of Diageo shares be worth in 12 months?
• Here’s what is baffling me about the stock market today
• How to build a £20,000-a-year passive income from a Stocks and Shares ISA
• After years of pain, is the Diageo share price looking up?

Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo Plc. 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.

It’s been a volatile period for the stock market, with the conflict in the Middle East driving a sharp energy spike and disrupting companies that trade in the region. Airlines are in one sector that has been particularly hard hit. In fact, I think some of the stocks in the sector can now be considered value stocks. Here’s one I’m checking out today.

A hit from fuel prices

I’m talking about easyJet (LSE:EZJ). Over the past year, the share price is down 34%, with the bulk of the move coming in 2026 so far. A major factor has been the spike in fuel prices, driven by higher oil prices. In fact, the half-year update last month showed £25m of additional fuel costs due to the Middle East conflict, contributing to a much wider-than-expected loss. At the same time, wages and other operating costs have remained elevated, also hampering profit margins.

Given that fuel is such a significant contributor to the company’s operations, it’s clearly a significant risk going forward. However, I don’t think it would take much for the stock to get back to levels seen at the start of the year.

The case for a rebound

For starters, demand is still very much alive. Summer bookings are strong, and the airline continues to benefit from resilient leisure travel trends across Europe. More importantly, easyJet Holidays is doing very well, with customer numbers increasing by 22% in H1 compared with the same period last year. It’s becoming a major profit engine and offers higher margins than the core airline business. This means that even if fuel prices remain elevated, the stock could still rally, with more diversified revenue streams.

However, the main reason I think the stock could climb back to January levels is a resolution in the Middle East. The conflict has stalled, with a ceasefire in place and a lack of desire from all sides to escalate (in my view). I struggle to see the global supply chain route through the Strait of Hormuz not operating at full capacity for much longer, as it damages all sides.

If this proves correct, fuel prices should fall as oil moderates, helping reduce easyJet’s costs almost overnight. Given that this is the largest factor negatively impacting the share price this year, I think the stock could trade back to the levels seen in early January at 522p, before the conflict began. From the current price of 366p, this would be a 43% increase. Based on a £2k investment, this could be worth £2,860.

Weighing it up

Of course, my subjective view on a war resolution could be wrong, which is the biggest risk to a rally in the easyJet share price back to the levels seen pre-conflict. However, even if the stock doesn’t climb 43%, I do believe it’s cheap. The price-to-earnings ratio is 5.17, well below the fair-value benchmark of 10 I use. Therefore, with a Foolish long-term investment outlook, I do think it’s a stock for investors to consider.

The post This value stock could turn £2k into £2,860 this year appeared first on The Twelfth Magpie.

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• On a P/E ratio of 5, could easyJet shares offer a bargain for the patient investor?

Jon Smith has no position in any of the 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.

When you see a FTSE 250 stock that’s up 988% in the past year, you could be forgiven for falling off your chair. We’re not talking about a penny stock here, but rather a company with a market-cap of £1.45bn.

Aside from the crazy rally, an important question many are asking is if this can keep going?

A crazy ride

I’m talking about Ceres Power Holdings (LSE:CWR). To begin with, let’s consider the big picture. Ceres sits in the middle of two hot themes right now, hydrogen and decarbonisation. Its fuel cell and electrolyser technology is designed to help power industrial sites and data centres with lower emissions.

We’re seeing both governments and corporations refocus on net zero goals, especially given the vulnerabilities flagged by more traditional energy sources in the Middle East. This is one key factor supporting the rally, not only in the stock but also in the sector.

Sentiment alone doesn’t deliver a 1,000% return. Another factor for Ceres has been smart execution. Over the past year, the firm’s begun converting years of research and development into tangible commercial deals.

A major milestone was the ramp-up of partnerships with players such as Doosan and Delta Electronics. With new deals announced regularly, investors are clearly excited about the revenue potential if this trend continues.

Finally, Ceres has been (and still is) a benefactor from the artificial intelligence (AI) data centre buildout. Ceres’ technology is increasingly being positioned as a clean, efficient solution for these sites. Given that many expect large-scale capex spending in this area to continue over the coming years, it looks like a major growth area for Ceres to target.

The outlook from here…

This is where things get a bit murky, from my perspective. On one hand, the long-term story does look compelling. If hydrogen scales the way many expect (and if Ceres continues to license its technology globally) the company could do very well. What I mean is that it has the potential to be a high-margin, asset-light machine. That could mean higher profits, and therefore a higher share price.

On the other hand, there are plenty of risks. Despite the soaring share price, Ceres remains loss-making, with negative earnings and a revenue base that doesn’t reflect the optimism from some investors.

In fact, the 2025 full-year results from March showed the operating loss widened from £31.1m to £47.6m.

The other big concern I have is that partnership deals are great, but the company actually needs to deliver on the promises over the coming year and beyond. That’s no easy feat. Based on the share price move, I think the best-case scenario has been factored into these deals. So if there are some hurdles, the stock could move lower fast.

Overall, I do like the company, but I think some are too optimistic about the revenue potential. Therefore, I’ll only consider buying if the stock returned to a more reasonable valuation.

The post This FTSE 250 stock’s up almost 1,000% in a year. What’s going on? appeared first on The Twelfth Magpie.

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Jon Smith has no position in any of the 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.

We’re a month into the new Stocks and Shares ISA year, so most investors probably still have some of their £20k annual allocation left.

With this in mind, some might look to target income from dividend stocks. By being smart with the way the money’s deployed, a four-figure monthly income further down the line is plausible. But how?

Key points to remember

To begin with, one benefit of using an ISA for this strategy is that dividends received will be banked without the tax being deducted. Put another way, there isn’t any tax payable on the income received in the ISA. This means payments can accumulate faster than usual, compounding income over time.

Another point worth noting is that reinvestment of dividends in the early years can make a big difference versus spending it. For example, if a stock has a dividend yield of 7% and someone invests £1k, in year one, it should pay £70 in dividends. Instead of spending this money, buying an additional £70 worth of the stock means that in the following year, the £1,070 could pay £74.90 in income. When this gets scaled up over time and money, it really makes a difference.

Please note that tax depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Running the numbers

Let’s assume someone invests £500 a month in an ISA portfolio that yields 7%. Based on the current yields of stocks in the FTSE 100 and FTSE 250, I think this is a reasonable target. In that case, by year 20, it could pay out £1,456 a month on average.

Of course, this might take longer if companies cut dividends or if some black swan events happen. Some might think waiting for two decades is too long. The amount invested can change things, as the table below illustrates, showing the year when the monthly average income reaches £1,456.

A potential contender

In terms of stocks to think about including, one that’s hot right now is Aberdeen Group (LSE:ABDN). The stock’s up 32% over the past year, with a dividend yield of 7.03%.

At its core, Aberdeen’s an asset manager. That means it earns fees based on the amount of client money it looks after, which currently sits north of £550bn. The bigger those assets and the better the investment performance, the more fees roll in.

The share price performance looks impressive, but it’s really a reflection of a rebound after years of underperformance. This was mainly due to painful outflows, but Aberdeen’s finally stabilising, thanks to rising profits and cost savings. Profit before tax jumped 76% in the latest 2025 full-year results.

As far as the dividend goes, I see it as sustainable. The payout’s been held steady for years, and improving profitability plus solid capital generation suggest it’s broadly supported by cash flow as the business stabilises. Of course, there are risks. For example, Aberdeen’s core investment arm continues to face pressure from low-cost passive funds, which pose a threat.

Yet overall, I think it’s a good stock to consider as part of a diversified income portfolio strategy.

The post How much is needed in an ISA to target a £1,456 monthly passive income? appeared first on The Twelfth Magpie.

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• How much do you need in an ISA for a £1,000-a-month second income?
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Jon Smith has no position in any of the 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.

Lloyds Banking Group‘s (LSE:LLOY) been a retail investor favourite for many years. Some buy the stock for capital growth, others for dividends, and more for a mix of the two. When focusing purely on the income side, what’s the magic number needed to bank an average of £500 each month from Lloyds’ shares?

Doing the maths

Let’s start with the numbers. The stock’s current dividend yield is 3.75%. So if someone wanted to make £6,000 from income over the course of the year, an investor would need to have £160k worth of Lloyds’ stock.

That’s assuming someone invested right now. Going forward, if the dividend per share increases, the amount made from holding the stock could also increase. For example, over the past year, the total dividend paid is 3.65p. This was a bump up from the 3.17p in the previous year, which was also higher than the 2.76p from the year prior.

There’s clearly a trend here. So over time, the person may be able to reduce the total amount of shares needed to be owned in order to generate an average of £500 a month.

The fundamental picture

Aside from the pure numbers, the other point that needs to be addressed is whether the outlook makes sense for the bank to do well. After all, if things go wrong for Lloyds, a dividend cut could prevent the investor from reaching their goal.

From my perspective, the outlook for sustainable dividends is positive. The bank’s benefiting from a higher-for-longer interest rate environment, aided by the likely increase in inflation this year. That might not be great news for borrowers, but it’s good for lenders like Lloyds. In fact, Q1 results from earlier this week showed a 9% jump in net income. This was driven by stronger lending income and an improving net interest margin.

The other reason why I like the bank is that it doesn’t rely on flashy investment banking revenues or risky international exposure. It’s a UK-focused, bread-and-butter lender. As long as the UK economy holds up reasonably well, the bank can continue to churn out solid earnings with strong cash flow. That ultimately translates to growing dividends.

Other alternatives

The bank does have risks, such as the ongoing saga with the car finance scandal. The reputational (and financial) damages still could increase, and so it needs to be monitored closely.

Yet even from the income angle, some might want to target divdiend shares with a higher yield. For example, 11 stocks in the FTSE 250 have yields above 9%.

To hopefully achieve a £500 monthly average payment, the total needed for a 9% yield would be £66.66k. This is much lower than the £150k for Lloyds, but it does have a potentially higher risk.

Yet it serves as a good point to show that even though I believe Lloyds is a good income share for investors to consider, there are plenty of other options out there that might be more suitable for people, depending on their risk tolerance.

The post How much do you need in Lloyds shares to make £500 in monthly passive income? appeared first on The Twelfth Magpie.

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Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group Plc. 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.

Retail investment platform AJ Bell regularly posts data of the most popular FTSE shares its client base is purchasing. It can provide a good indication of sentiment around certain stocks, especially at the moment when some might be uncertain about what to do given the conflict in the Middle East. So what’s hot right now?

Notable names

Below shows the list of the top five most bought shares on the platform for the past week.

On the face of it, having Rolls-Royce and Nvidia in the top five isn’t too much of a surprise. Both have been very popular with the retail crowd for the past couple of years, with share price returns over this period to justify it! Microsoft is a similar story, with a strong push into artificial intelligence (AI), seen as the key growth sector for the coming years. Its ties with OpenAI, along with the success of Microsoft’s own model Copilot, are other reasons I think it’s popular.

LondonMetric Property is a slightly more unusual stock on the list, but with a dividend yield of 6.3%, it’s one of the highest-yielding options in the FTSE 100. Given the reliable nature of the payments from the real estate investment trust (REIT), I believe this is popular right now due to the desire of many to bank some passive income. With high volatility driven by elevated geopolitical tensions, investors could also see the company as a defensive play.

As a side note, any investor should do their own research before deciding what stocks to buy. Simply buying the most popular stocks isn’t really a strategy I’d recommend, since even the broader crowd can be wrong about its convictions. However, this data’s useful to shortlist companies to research. From there, digging deeper can help someone make up their own mind about whether it’s a stock they feel can outperform.

One to watch

The stock that caught my eye was Legal & General (LSE:LGEN). Over the past year, the share price is up 7%, with a current dividend yield of 8.65%. This takes the biscuit as the highest yielding stock in the FTSE 100.

This is a business built on managing pensions, life insurance, and other financial products. It effectively sits at the heart of Britain’s ageing population trend, which is just one reason why I think savvy investors are snapping it up.

Aside from that, in a world where situations are changing at a frightening pace, Legal & General provides operational stability that I believe people really appreciate. The company has been simplifying its structure and selling non-core assets over the past year. Even though underlying earnings growth isn’t crazy high, the latest results did show strong demand for retirement products like annuities.

The earnings enable the dividend (which I believe is the main reason for interest right now) to continue to be paid. Aside from the yield being high, the company has a long track record of paying and growing dividends. For income investors, that consistency matters.

Of course, there are risks. The company has exposure to private credit investments, and negative recent coverage suggests its valuations could be under pressure. Yet overall, I think it’s a stock for investors to consider.

The post AJ Bell investors are snapping up these FTSE shares. Should others join them? appeared first on The Twelfth Magpie.

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Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended LondonMetric Property Plc, Microsoft, Nvidia, and Rolls-Royce Plc. 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.

Although it’s true that many FTSE 100 stocks are mature companies, it doesn’t mean there isn’t still potential for large growth. This is particularly evident when it comes to firms that have experienced a share price fall.

Any bounce back could offer large potential rewards for a shrewd investor. So what’s the opportunity I might have spotted?

Looking through the weeds

I’m talking about Mondi (LSE:MNDI). The business produces paper and packaging products used in everyday life. Given that the stock’s down 34% over the past year, let’s address that to start with.

In classic cyclical fashion, Mondi’s been hit by a perfect storm. Profits fell sharply in 2025, with earnings dropping nearly 30% as selling prices weakened and demand softened. At the same time, costs have surged. Energy and raw material expenses have all jumped, something that has worsened recently due to geopolitical tensions and higher oil prices.

This has squeezed profit margins, with the share price falling amid disappointing earnings. To make matters worse, management cut the dividend in February and announced plant closures and job cuts, which are hardly confidence-boosting signals for investors.

A comeback king?

When I look at analyst forecasts, there’s a strong indication that the stock might have fallen too far. Of the 15 contributors putting out a rating, the average 12-month target price is 978p. From the current price of 735p, that’s a 33% difference. So if those forecasts prove to be correct, buying now could deliver a healthy return.

Of course, these are subjective views. Even though these analysts are experts, there’s no guarantee the share price will hit that price. However, when I look at the fundamental picture, I think there are several reasons to be optimistic.

For a start, Mondi’s actively pushing through price increases to offset the higher costs I mentioned earlier, although there’s a lag before this feeds into profits.

In a trading update from earlier this month, sales volumes for Q1 increased, which suggests to me that underlying demand hasn’t disappeared. The company said volume gains were “supported by recent capacity expansions, as well as our exposure to diversified geographies, end markets and products”.

There’s also a bigger structural story. Packaging demand is closely tied to e-commerce and sustainability trends. As companies shift away from plastic and towards recyclable materials, Mondi’s paper-based solutions could be well-positioned over the long term. Granted, this maybe isn’t as relevant to the share price over the next 12 months, but it does provide sound reasoning for those with a Foolish long-term investment timeframe.

Weighing things up

The views from analysts, along with some encouraging signs from the latest trading update, mean that I get why this could be seen as a cheap purchase. However, risks around elevated costs weighing on profits is an ongoing concern.

On that basis, I’m thinking about allocating a small amount to the stock, and will look to pound-cost-average over time. Investors with a similar view to me could consider this too.

The post Analysts think this FTSE 100 stock could rally by 33% in the coming year appeared first on The Twelfth Magpie.

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Jon Smith has no position in any of the 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.

If you’re like me, you forget how quickly time passes. We’re rapidly approaching the halfway mark in 2026, and are now closer to 2030 than 2020. Over the past six years, the FTSE 100 has endured a global pandemic, a tariff meltdown, countless wars and more.

Yet if someone had parked £10k in the index at the beginning of 2020, what would it look like right now?

Show me the numbers!

At the start of January 2020, the index was trading at 7,604 points. Over the period, it traded to a low of 4,993 points during the pandemic crash in 2020, with a high of 10,910 points in February. A £10k investment would be worth £13,668 at the moment, given the gain of almost 37% from the start of 2020.

On the face of it, that seems like a good return. To be clear, no one should be unhappy with a profit! However, it isn’t as good as some might expect. Across the pond, the S&P 500 has delivered a 120% return over the same period.

At a stock-specific level, some constituents have vastly outperformed. Rolls-Royce is a good example, gaining 389% during the period in question. Of course, some stocks have lost significant value over the years as well. So things do need to be taken with a pinch of salt. But on the whole, I think an active investor with a carefully-selected stock portfolio could have outperformed the index in these years.

Where to from here?

The past is only half of the discussion. Where the index goes from here is equally worthy of conversation. Given the market’s ability to recover and shrug off the impact of the events in recent years, I believe that over a long enough timeline, the index can continue to deliver positive returns in the coming years.

However, I think an investor could target specific sectors that are poised to grow faster than average. For example, FinTech. IG Group (LSE:IGG) slots into this category nicely as a FTSE 100 growth stock.

It enables clients to trade and speculate on the price movements of shares, currencies, and commodities. In simple terms, when clients trade more, IG earns more through fees, spreads, and financing charges. It’s grown rapidly since 2020, in part due to higher market volatility. I can only see this continuing in the years ahead, so that’s one tick in the box for the outlook.

Add to this the fact that it’s pursuing an expansion-focused strategy. This includes acquisitions like Freetrade and moves into crypto. There’s a clear attempt to diversify beyond just a standard brokerage offer. However, there are risks. Regulation is the elephant in the room. IG’s core products are leveraged and high-risk, meaning regulators are constantly watching. Any tightening of rules around retail trading could hit growth.

Even with this, I still believe it has a strong shot of outperforming the broader index in the coming years and therefore could be considered by investors.

The post £10k invested in the FTSE 100 at the start of the decade is now worth… appeared first on The Twelfth Magpie.

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Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Rolls-Royce Plc. 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.

From my research, investors can currently achieve 4.51% with an easy-access Cash ISA. By contrast, the FTSE 100 average dividend yield is 3.02%.

For income investors with a patient mindset, compounding gains over several years helps to build wealth. But which avenue can reach this goal faster?

Weighing up both sides

With a competitive interest rate, a Cash ISA offers a predictable return that isn’t at the mercy of market swings or dividend cuts. Further, the interest paid isn’t subject to tax. In volatile periods, like we saw earlier this year in the stock market, the stability of not having capital at risk can be very appealing.

Please note that tax depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

But let’s not get carried away. Even though the index average might be lower than some Cash ISA’s, a carefully picked selection of stocks from the index can raise the yield for a portfolio comfortably above 6%. Therefore, that provides a better return than the ISA, even with the added risk.

The other powerful argument for stocks is that the dividend yield isn’t the only way to build wealth. Dividend shares offer not just income, but growth. Many companies increase their payouts over time and, crucially, their share prices can rise as well. Reinvested dividends can supercharge compounding in a way cash simply can’t replicate. For money in a Cash ISA, it doesn’t have any potential to enjoy capital appreciation beyond the interest being paid on it.

So although there are pros and cons for both options, I think on a risk-adjusted basis, dividend shares offer a more compelling (and likely faster) way to build up wealth over time.

Dividend delight

One example of a stock that could be included in the portfolio is LondonMetric Property (LSE:LMP). The share price is flat over the past year, with a dividend yield of 6.51%. Interestingly, the yield hasn’t fallen below 5.5% at all over the last year.

It’s a real estate investment trust (REIT) that owns a large portfolio of UK properties, particularly in high-demand areas like logistics warehouses and healthcare sites. These are typically let out on long-term leases, where tenants cover most property costs. That creates a steady, predictable stream of rental income.

It’s that income model that helps explain why the dividend looks relatively sustainable. The company boasts high occupancy (around 98%) and long leases averaging well over a decade, locking in cash flow visibility. On top of that, net rental income has been growing strongly, jumping to more than £450m for the full year ended in March.

Encouragingly, the dividend’s been increased for more than a decade, with another rise expected this year. Even better, earnings broadly cover the payout, suggesting it isn’t being funded unsustainably through debt.

Looking ahead, the outlook appears positive. Demand for logistics properties remains strong, and is an area I expect will keep growing. In terms of risks, it’s highly sensitive to interest rates. When rates rise, borrowing costs increase and property valuations can come under pressure.

Even with that, I believe it’s a good stock to consider as part of a dividend investor’s strategy.

The post Cash ISA vs dividend shares: which builds wealth faster? appeared first on The Twelfth Magpie.

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Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended LondonMetric Property Plc. 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.

Real estate investment trusts (REITs) are a popular way for people to earn income from the stock market. However, they still need to be treated with caution, as not every trust in the sector is a good pick. Yet when I spotted this REIT with a 7.66% dividend yield, it certainly got my interest. Is it worth buying now?

Reviewing the details

I’m talking about AEW UK (LSE:AEWU). The share price is up a modest 3% over the past year. The company buys and manages smaller commercial properties across the UK. I’m talking about offices and retail units, with the management team often targeting assets priced below £15m that larger institutional investors might ignore.

In a way, the trust is focused on value investing, but in the property space. As a result, income comes not just from rental flows, but also from capital appreciation over time from buying mispriced or underperforming buildings.

The lack of serious share price growth in the last year does speak to the fact that the UK commercial property sector has been under pressure from higher interest rates and economic uncertainty.

That’s weighed on valuations and sentiment, even for AEW, which I would describe as a well-run trust. Yet I believe this makes the stock undervalued. For example, the share price trades at a 5.3% discount to the net asset value (NAV). In theory, there shouldn’t be a discount, but the difference indicates to me some lingering negative sentiment weighing on the stock.

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Dependable income

Despite the challenges, AEW has shown resilience. It’s maintained a remarkably consistent dividend track record, with 41 consecutive quarterly payments! This clearly signals underlying cash flow strength. On top of that, the company continues to actively manage its portfolio to target higher-yielding opportunities.

In my view, a major benefit was highlighted in the latest quarterly results. It mentioned that the “company continues to benefit from a low fixed cost of debt of 2.959% until July 2027”. This helps ensure financing costs in the coming year won’t catch the business off guard.

The above means that the dividend per share seems very sustainable to me. If an investor put £2k in the stock, the quarterly dividends could start to accumulate. If the dividends were reinvested back in the stock, things could compound faster. After a decade, without having to put another penny of capital in, it could pay out £340.55.

Of course, there are risks associated with dividends. There’s no guarantee they’ll continue into the future. If the trust runs into problems, it could result in the income being reduced. However, given the trust’s current outlook and financial situation, I think it’s a stock worth considering.

The post £2,000 in this REIT could pay £340 in annual passive income appeared first on The Twelfth Magpie.

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Jon Smith has no position in any of the 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.