Great Portland Estates (LSE: GPOR) is, in my view, one of the most defensive stocks investors can buy today. The London-focused West End property developer owns and manages a portfolio of high-quality London property, and has proven itself to be an astute asset manager over the past few years.
Property income
In recent years, the company has been selling rather than adding assets to its portfolio, taking advantage of the buoyant demand for London property. After this pruning, the firm has “the financial strength to exploit any market weakness where we unearth it” according to CEO Toby Courtauld, who was commenting on the full-year results for the group, which were published today.
Further, the company believes that while the London property market has been lacking “clear direction,” the property manager is not bracing for a slump in asset values, no matter what the result of Brexit negotiations. “Whatever the outcome, we expect London to remain a truly global city,” today’s update notes.
Indeed, Great Portland has not experienced the slump in asset values many analysts were predicting following the Brexit vote. According to today’s figures, the group’s net asset value per share rose 5.8% to hit 845p (compared to the current price of 670p) at the end of March. And the annual rent roll increased 7% year-on-year to £107.3m on a like-for-like basis, which excludes property sales.
The FTSE 250 company said it made a pre-tax profit of £76.7m, against a loss of £140.2m in the previous year when property values declined.
Based on these numbers, management has hiked the final dividend for the year by 14.1% to 7.3p giving a full-year dividend yield of 1.7%. This distribution might not seem that appealing at first, but the company has a record of returning excess cash from developments to investors via special dividends. In 2018 the business has already returned £416m in extra cash to investors via a £110m special dividend and £306m B share scheme.
As Great Portland continues to sell development assets into a healthy market, I expect the firm’s record of cash returns to continue.
Infrastructure investment
Another defensive business that I believe could be an excellent income investment for your retirement portfolio is infrastructure investor 3i Infrastructure (LSE: 3IN).
3i has a long established record of achieving impressive returns for investors. At the beginning of May, it posted a 28.6% total return on shareholders’ opening funds in the year to end-March on its growing range of corporate and infrastructure investments.
Asset sales helped the firm achieve the bulk of this return and fund a special dividend for investors of £425m. 3i was able to distribute this cash as well as investing an additional £525m in new enterprises such as Alkane Energy, a business generating power from coal mine methane gas.
As investments, 3i and Great Portland are relatively similar. They both invest in tangible assets, with a long-term outlook and the goal of producing both income and capital gains for investors.
And like Great Portland, shares in 3i also look cheap. The last reported net asset value was 211p, only slightly below the current share price of 230p. Meanwhile, the stock supports a dividend yield of 4.5%, which is attractive enough even without including any special distributions.