As value investors looking for cheap UK shares to add to our portfolios, we always check to see what dividend is offered.
However, rarely do we think about shareholder perks offered by firms. Some companies reward you for buying into their stock by offering tasty discounts.
A recession-proof stock offering 25% off your storage needs
For example, Safestore (LSE:SAFE) is the UK’s largest and Europe’s second largest provider of self-storage space. Safestore has been a pandemic winner, seeing net income soar from £178m in 2020 to £382m in 2021.
The stock looks cheap to me with a price-to-earnings (P/E) ratio of just 5.
In the self-storage industry, it is said there are “four Ds” that benefit the sector: death, divorce, disaster and downsizing. For that reason, I think Safestore is a good risk-off addition to my portfolio.
As well as offering a dividend yield of 2.4%, Safestore provides those holding at least 100 shares (worth £1,113 at current market prices) a 25% discount off their services.
Supposing you wanted to rent out 10 square feet of space (about the size of a car boot) for a year, that would cost around £240. The 25% discount would, therefore, be worth £60. That is the equivalent of a 5% yield on the shares.
Having said that, as consumer budgets tighten, self-storage might start to look like an easy luxury to scrap. Why pay to house your surplus items when you could bin or sell them?
A high-street favourite helping investors look their best
Next (LSE:NXT)’s share price has been on a steep downward trend this year, losing 28% of its value since 1 January. It is now trading at a P/E ratio of 11, far below that of some of its closest FTSE 100 competitors. JD Sports has a P/E of 15.8, and Burberry trades at a P/E of 17.8.
In addition, the retailer offers investors a 25% discount off purchases of any size once a year, as long as they hold at least 100 shares.
However, those 100 shares have a hefty market price of £5,818 at the time of writing.
Even if I did all my autumn and winter shopping at once, I would only spend around £500, which would leave me with savings of just £125. That would only equate to a 2% return on the shares, and I would have to wear almost exclusively Next produce just to achieve that.
And with a moderate dividend yield of 2.2%, below the FTSE 100 average of 3.7%, I will have to say “next” to the prospect of investing in Next shares, especially as consumer sentiment looks set to continue souring.
Investing in what you know…
Legendary investor Peter Lynch coined the maxim “invest in what you know”. That means using your own experience as a consumer to sniff out companies that are doing a good job.
And given that some companies offer shareholder discounts, I think it makes even more sense to invest in companies that I shop with.
However, I also have to take into account the companies’ fundamentals and the generosity of the perks they offer before taking the plunge with my hard-earned capital.