FTSE 100 incumbent LondonMetric Property (LSE: LMP) appears prefer it has all of the hallmarks to turn out to be a possible future Dividend Aristocrat, in my eyes.

Right here’s the pondering behind my assertion, in addition to why I’d love to purchase some shares once I subsequent can.

Diversified property

You might need already guessed from the identify however LondonMetric makes cash from diversified property belongings. From a returns view, it’s set up as an actual property funding belief (REIT). It is a enormous plus, because it implies that the enterprise should return 90% of income to shareholders.

Please notice that tax therapy is dependent upon the person circumstances of every shopper and could also be topic to vary in future. The content material on this article is supplied for info functions solely. It isn’t meant to be, neither does it represent, any type of tax recommendation.

LondonMetric shares have risen 16% previously 12 months from 175p right now final 12 months, to present ranges of 204p.

My funding case

First off, I’m a giant fan of LondonMetric’s enterprise mannequin. Generally, REITs are likely to concentrate on one sort of property. LondonMetric possesses a diversified vary of belongings, which will help supply safety in opposition to a downturn in a single space. Plus, it’s capitalising on common traits to develop income and hopefully returns. A primary instance of that is its publicity to logistics amenities within the wake of the e-commerce growth.

Moreover, it understands market traits. For instance, it’s shifting away from workplace house as working from dwelling traits have risen because the pandemic. Plus, a current acquisition has given it entry to defensive properties reminiscent of hospitals, which is able to give it good earnings visibility as demand for hospitals isn’t going to sluggish down.

One other facet I like about LondonMetric’s modus operandi is concentrating on belongings with long-term tenants for development. These tenants are tied down to long-term agreements, and are much less prone to default on hire funds.

Shifting on, LondonMetric’s current updates have confirmed its working with a 99% occupancy price, which is spectacular, when you ask me.

returns, the shares supply a dividend yield of 5.2%. For context, the FTSE 100 common is 3.6%. Nonetheless, I do perceive that dividends are by no means assured.

Lastly, LondonMetric has an ideal observe report of payouts, and has elevated these for the previous 9 years in a row. Nonetheless, I do perceive that the previous isn’t a assure of the longer term. If it will possibly proceed on this vein, I can definitely see it turning into a high dividend inventory sooner or later.

Dangers and my verdict

The most important threat I’m involved about proper now for LondonMetric is debt ranges. These will be trickier to handle throughout increased curiosity environments, like now. Plus, debt repayments can take priority over development and returns initiatives, so I’ll be watching with curiosity. Nonetheless, it’s price noting the debt ratio in comparison with payout protection on its steadiness sheet isn’t a priority, not but not less than.

A smaller concern is the agency’s propensity for acquisitions. They’re nice once they work out, however will be damaging from a monetary and investor sentiment perspective once they don’t.

Total, I reckon LondonMetric could possibly be a unbelievable inventory to purchase for returns and development. A various vary of belongings, defensive traits, and a very good observe report assist my funding case.