Stock market

£250 would buy me 221 shares in this exciting 6.6% income share!

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As part of the income, Urban Logistics REIT (LSE: SHED) looks like a great prospect to me.

If I had just £250 to invest today, I could acquire 221 shares in the business at just £1.13 per share.

Here’s why I’m happy with the stock!

Last mile delivery

Urban Logistics is incorporated as a Real Estate Investment Trust (REIT). Simply put, it is a property business that makes money from rental income. From an income perspective, it must return 90% of profits to shareholders, making it an attractive passive income option.

Urban provides warehousing space designed for ‘last mile delivery’ for firms operating online shops and stores, which is most businesses these days with products sold directly to consumers.

Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content in this article is provided for informational purposes only. It is not intended to be, nor is it intended to be, any form of tax advice.

I’m not surprised to see shares down 12% over a 12-month period. At this time last year they were trading at 132p, compared with current levels of 112p. The current economic downturn in which we find ourselves has hurt the real estate sector, mainly due to interest rates and inflation.

My investment case

The warehousing and storage sector has exploded in recent years. This is due to changes in shopping habits, and the rise of online shopping and e-commerce. What I love about Urban is that its features are designed to help firms with this critical last-mile delivery. In this segment of the industry there is a shortage of supply compared to an increase in demand. Citizens may be well positioned to leverage and enhance efficiency and returns.

Due to high interest rates, net asset values ​​(NAVs) for most property stocks, including urban, have come down significantly. However, based on a current NAV of 165p per share, and a current share price of 113p, the shares look undervalued. It may be smart to buy shares before any interest rate cuts, once again NAVs, as well as Urban’s share price and investor sentiment rise.

Finally, the dividend yield of 6.6% is very attractive. However, I am aware that profits are never guaranteed.

From a downside perspective, Urban has grown through acquisitions. They have worked so far, which is great. However, if one fails, it can have a major impact on the firm’s balance sheet as well as investor sentiment.

Another threat is the continued economic downturn. There is no clear indication of when interest rates may come down, along with inflation. As businesses are operating with tight margins, perhaps reducing warehousing costs is something they may need to consider? I will keep an eye on it through performance updates.

Final thoughts

An attractive valuation and passive income opportunity entices me. Additionally, demand for last-mile delivery facilities outstripping supply is also a major draw. This is especially so when the e-commerce sector seems to be booming.

After all, Urban already has some great relationships with major retailers that show its importance. Among them are shoes and Sainsbury’sto name a couple.

For me, the pros outweigh the cons by some distance, making Urban look like an exciting opportunity to help build wealth in my portfolio.


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