As such, here are five FTSE 250 stocks that I would acquire for my portfolio today. 

Shares to buy today for growth

The first company on my list is home services group Homeserve (LSE: HSV). Over the past decade or so, this organisation has grown steadily through a combination of acquisitions and organic growth across the UK and North America.

Homeserve has built a group of home improvement and maintenance businesses, providing consumers with a one-stop-shop for services. Revenues have increased at a compound annual rate of 16% since 2016, and as consumers continue to splash out on their properties, I think this trend will continue. 

Unfortunately, the group suffered a setback last year as profits plunged more than 70%. However, analysts are forecasting a rebound in the current financial year, and they believe growth should return in 2023. 

Some challenges the company may face, which could hamper growth, include competition and rising prices for acquisitions. Despite these risks and challenges, I would buy the stock for my portfolio of FTSE 250 shares today. 

Home improvement

On the home improvement front, I would also acquire engineered door and window components supplier Tyman (LSE: TYMN). 

The current building boom is landing this business with windfall profits. Earnings per share are projected to increase by 57% this year and a further 6% in 2022. 

According to the company’s half-year report, it is benefiting from both high levels of demand and higher prices. This is giving management the resources required to increase market share across North America, including the funding needed to develop new products.

I do not think Tyman’s current growth rate is sustainable, but if the company is able to reinvest its windfall back into expansion initiatives successfully, the enterprise’s growth should continue. Albeit at a lower rate. 

And after a bumper 2021, Tyman’s potential over the next few years has improved dramatically. 

But there are still risks. Challenges that could hold back growth include competition and a housing market slowdown. Rising costs may also weigh on profit margins. 

FTSE 250 hospitality

Like every other hospitality business in the UK, JD Wetherspoon (LSE: JDW) struggled during the pandemic. But the company is now on the road to recovery. For the first 15 weeks of its financial year, sales were 8.9% lower than the same period in 2019. 

The speed of the recovery differs significantly across the group. City centre locations such as Oxford and Newcastle have recorded double-digit growth compared to 2019 levels.

However, trade in central London, airports, stations, and regions of the UK where restrictions apply, means activity there is still down by a double-digit percentage compared to 2019 levels. 

Therefore, it looks as if Wetherspoon still has some way to go before it can claim to be back on track. Still, I think this FTSE 250 hospitality giant is an attractive way to invest in the UK economic recovery.

Risks to my investment case include rising staff costs and a squeeze on consumers’ income due to inflation. There is also the potential for further coronavirus restrictions, which may derail the recovery. 

Property shares to buy

Another recovery play I would buy is real estate investment trust (REIT) Shaftesbury (LSE: SHB). 

Due to the pandemic, the central London landlord was forced to write down the value of its property portfolio last year. It also struggled to collect rent from tenants that lost virtually all of their business overnight when forced to close. 

The good news is, business activity in general and central London are now recovering. This is having a knock-on effect on commercial property values. According to a trading update published at the end of October, Shaftesbury’s portfolio increased in value by 5% during the second half of its 2021 financial year.

What’s more, by the end of September, just 2.9% of the portfolio was available to let, down from 8.4% at the end of March. 

These figures appear to show that tenants are returning to central London, and the value of the company’s property portfolio is appreciated as a result. 

I would buy the REIT today based on these numbers even though further coronavirus restrictions could significantly impact commercial property values, and many tenants may not survive another lockdown. This is probably the most considerable risk to the company’s growth right now. 

Retail behemoth

Frasers Group (LSE: FRAS), formerly known as Sports Direct, suffered a loss of £83m last year. However, analysts are expecting profits to rebound this year and grow further in 2023. 

Heavy investments in the group’s online division helped it weather the Covid storm, and this online business is now helping drive the recovery. Management is so confident about the group’s prospects it is returning cash to investors with a share repurchase programme. This should help improve earnings per share, and the company’s overall valuation. 

At the time of writing, the stock is dealing at a forward price-to-earnings (P/E)  multiple of 19.3. According to current analysts projections, this could fall to 17.3 next year.

Evidence shows that consumers tend to trade down to lower-priced commodity products in periods of high inflation. With inflation set to hit 5%, Frasers’ Sports Direct business could possibly benefit from this trend. I would buy the stock for this potential as well as the reasons outlined above. 

Some challenges the group may face as we advance include rising costs due to inflation and further coronavirus restrictions. 

The London-focused property play is expected to endure a 45% earnings fall in this fiscal year to September. But City analysts anticipate a near-90% bottom-line bounceback in financial 2022. Can the Shaftesbury share price keep on chugging higher then?

Four key issues for the Shaftesbury share price

There are several things I’d consider when looking at the Shaftesbury share price:

#1: A worsening Covid-19 crisis. The government’s plan is to gradually reopen the economy with all lockdown restrictions set to end by 21 June. However, the emergence of a third wave on these shores is something prime minister Boris Johnson is publicly predicting. And it could scupper that re-opening roadmap for British businesses.

#2: The end of furlough schemes. The Local Data Company says more than 11,000 stores in the UK closed in 2020. It predicts that another 18,000 could disappear this year following the collapse of high-profile retailers such as Debenhams and Topshop and the slimming down of retailers such as John Lewis. But the worrying news doesn’t end here as the body warns that the end of the government’s furlough support schemes later in 2021 could create even more casualties over the next two years.

#3: The rise of homeworking. It’s been suggested the national lockdowns of the past year have prompted a sea change in the way modern workers go about their business. And it’s led to speculation that demand for office space, like those operated by Shaftesbury, might fall as flexible working practices become the norm.

#4: High valuation. The recent Shaftesbury share price explosion makes the company look mighty expensive. At current prices, the UK property share trades on a forward price-to-earnings (P/E) ratio of 130 times. This sort of sky-high valuation leaves Shaftesbury in danger of a sharp share price correction if trading performance worsens and predictions of a strong earnings bounceback start to look wobbly.

In conclusion

I won’t suggest Shaftesbury is a basket case. All of its properties are located in key entertainment, tourist and shopping districts including Soho, Covent Garden and Chinatown. The streets around these timeless areas will be packed out again when the Covid-19 crisis finally ends. Furthermore, lots of the company’s tenants are niche retailers whose long-term outlooks are much stronger than much of the broader retail sector.

Still, in my opinion, Shaftesbury’s rocketing share price factors in all of the good news regarding the end of lockdowns. And, as I say, this leaves this UK share in danger of slumping again if news flow on this front worsens. With the business facing significant long-term headwinds like e-retail and the rise of homeworking, I’d rather buy other stocks for my ISA right now.

UK shares

The first company on my list is the London West End landlord Shaftesbury (LSE: SHB). This investment isn’t for the faint of heart.

Before the pandemic, the company had made a name for itself nourishing small businesses. It was proud of its record of helping small retailers establish niche offerings across its West End estate. These unique offerings attract consumers to the area, which increases the appeal for other stores.

Unfortunately, the pandemic hurt these companies more than most. Shaftesbury’s revenue collection has slumped as a result. In its latest trading update, the organisation told investors that it collected just 45% of rent due for the quarter ended 31 December.

However, despite these dire figures, I’ve been buying Shaftesbury as part of a diversified basket of UK shares. The company owns an irreplaceable portfolio of real estate throughout London’s key entertainment and shopping district. The pandemic has hurt revenue collection and demand for new leases, but I believe that, over the long term, demand will return. 

This is why I think Shaftesbury’s one of the best stocks to buy now to play the economic recovery.

Of course, the company isn’t without risk. If the pandemic continues to rumble on in 2022, the group may lose more tenants. It may also have to raise money from shareholders to prop up its balance sheet. The group has already taken this course of action once in the past 12 months. Another cash call or additional disruption to the portfolio could leave lasting effects on the business. 

Despite these challenges, I’ve been buying the stock for my portfolio today. 

Best shares to buy now

Another recovery play on my list of UK shares to buy for the next few years is Melrose (LSE: MRO). 

The engineering sector tends to expand and contract in line with the global economy. Many engineering companies are poorly run and have small profit margins, which means they tend to be lousy investments.

However, I believe Melrose is one of the best-run engineering companies in the UK. It has a strong track record of buying struggling businesses, improving them, and then selling them on, returning the proceeds to investors. 

Melrose posted a steep fall in annual profit last year as the pandemic hit top and bottom lines. But its Nortek business was trading “very strongly” and management is now looking to offload this air-conditioning enterprise. Any sale would unlock additional capital, which could then be reinvested back into the company.

That said, Melrose is still exposed to multiple risks. Its GKN division has  performed poorly over the past 12 months, and management thinks it could take at least another year for the business to recover. This could drag on growth and profitability in the near term. What’s more, the company may struggle to find a buyer for Nortek, which would setback growth plans. 

Nevertheless, despite these challenges, I’d buy the stock for my portfolio of UK shares today as a recovery investment. 

Each has lost between a third and two-thirds of their value over the past year. But are we looking at long-term bargains here, or could they have further to fall?

This cheap property share comes with a student discount

Student digs provider Empiric Student Property (LSE: ESP) has ‘only’ fallen a third in value from its year high. The company reported a marginal decrease in revenue in H1 of £34m from £35.7m attributed to lower summer term lets. However, underlying growth increased 8%.

While dividends remain suspended under the fourth quarter, they are covered 159% by adjusted earnings.

Thanks to the recent A level exams debacle, a bumper crop of students is expected for the new academic year and supply of suitable properties is still limited. Bookings are only 7% below the same period last year.

Following the coronavirus outbreak, the company is seeing an increase in requests for self-contained studios and en-suite accommodation. With a successful refinancing in April the group has a strong balance sheet. It has £12m of cash and £35m of undrawn debt facilities available.

The firm previously provided a good dividend income of 5p per year. With a current price-to-earnings ratio around 15 I think this cheap property share is a buy.

London calling

West End landlord Shaftesbury (LSE: SHB) owns a 15.2 acre property portfolio predominantly in Carnaby Street, Soho, and Covent Garden.

The share price has fallen 50% in the past year and the REIT is trading at around half its net asset value.

The coronavirus pandemic forced Shaftesbury to scrap its dividend, suspend further payments, and defer rent payments for its commercial tenants. It warned that at least half its rent could be uncollected in the second half of 2020.

The firm swung to a loss this year, but I’m confident that if you take a long-term view the share price will come bouncing back and the dividends will be reinstated. The location of its properties is quite simply unique. However, it does look expensive right now on a price-to-earnings ratio of 28, and I foresee more short-term pain ahead with Brexit around the corner. A brave buy only, in my book.

A shift to working from home?

The final cheap property share on my list is Workspace Group (LSE: WKP). As the name suggests, the company rents out flexible office space mainly in London and the South East. Needless to say, this has not been a good market to be in during the pandemic.

I know that I personally won’t be returning to the office until at least 2021 and I think that the coronavirus may have vastly accelerated the culture of working from home for good. I certainly can’t imagine returning to a five-day-a-week office environment now.

The shares are down nearly 60% year-to-date. Workspace announced it had received 65% of rents due in the second quarter, down from 80% last year and customer activity was only 15% of usual levels.

I used to own shares in Workspace group, but I can’t see it being back in my portfolio any time soon. I believe the fundamental business model for the company may have changed permanently. This is a cheap property share with good reason.

You have one residential property, and you have a good tenant who’s paying regularly and everything is fine. But then, later, what if your tenant leaves and your next one isn’t so good? It can be very hard to get rid of a bad tenant, and very costly — it’s something that’s happened to me. Or say you can’t find a new tenant right away? You might have a void for weeks, or even months, perhaps many months — that’s happened to me too.

Compare to shares

These are things that are easily overlooked when you’re comparing potential rental income to likely stock market returns. Now sure, companies can take a break from paying dividends when times are tough, which I guess is the equivalent of a rental void. But you can allocate your investment cash across multiple stocks, to spread the risk, far more easily than you can with a property investment.

The other downside is that, unless you have the price of a high-street store, a shopping centre, or a factory to invest, you’re ruled out of investing directly in the commercial property market. And, despite the current retail slowdown, I rate that as a solid long-term investment.

But there are ways to invest in property which avoid these shortcomings, and leave you with no hands-on management to do, and that’s to buy shares in a real estate investment trust (REIT). I’m looking at one of those today.

Carnaby Street

It’s Shaftesbury (LSE: SHB), which owns a chunk of London’s West End, including a number of properties on the world-famous Carnaby Street. The share price is down 4% as I write, on the back of 2019 full-year results, which show that even such esteemed real estate isn’t immune to wider economic troubles. 

Full-year pre-tax profit was reduced from £175.5m a year ago to just £26m, but that’s largely due to an asset revaluation. Net property income rose by 4.5%, earnings on an EPRA basis gained 5.6%, and the company lifted its dividend by 5.4% to 17.7p per share for a modest yield of 1.9%.

Chief executive Brian Bickell spoke of “an impossible-to-replicate resilient portfolio,” and that to me is the firm’s key asset. We talk about competitive advantages and barriers to entry all the time here, and owning some of the most desirable retail real estate on earth is something that really can’t be beaten.

Discount

Shaftesbury puts its EPRA net asset value at 982p per share, and that puts the current share price (after the day’s drop) on a discount of 5.7%. That’s not as big a discount as other REITs, but I think that shows the resilience of trusts investing in the most desirable properties. And even after the day’s share price fall, Shaftesbury shares are still up 20% over the past five (dreadful retail) years, compared to a 10% gain for the FTSE 100.

I expect Shaftesbury will very rarely, if ever, experience a lengthy void in any of its top-quality West End properties, and that makes it a buy for me for property investors.

As it turns out, there is. A real estate investment trust, or REIT, is a company that owns and operates a portfolio of properties. By buying shares of a REIT, you gain indirect exposure to its portfolio (and therefore, to the property sector as a whole). REITs are obligated by law to distribute 90% of their profits to shareholders, so you can be sure that a large proportion of the earnings are flowing through to you. Furthermore, they give the average investor an ability to gain exposure to a far more diverse number of properties than they would get by buying, say, a house or flat outright. Here are some REITs that I would consider investing in.

Shaftesbury

Everyone knows that the most important thing about property is location, location, location. West End-focused REIT Shaftesbury (LSE: SHB) ticks all the boxes in this respect. It owns mainly commercial properties in areas such as Covent Garden, Carnaby and Soho, which I believe is a no-lose proposition when one considers the historical attractiveness of an area like Central London. 

I also think that Shaftesbury’s enviable position gives it relative insulation from the fallout of a potential no-deal Brexit. Let me explain. The UK property market has been skittish ever since the 2016 Brexit referendum. However, the UK domestic market is a zero-sum game — there are only so many places that money can go to, and in times of trouble it will flow from more risky investments to less risky ones. When it comes to investing, I believe that simpler is better, and nothing presents a simpler value proposition than property in Central London. And remember, Central London retail also benefits from the tourist boom, which has actually been helped by the pound’s fall on the back of Brexit.

Urban Logistics

If I want to add a little diversity to a real estate portfolio, then I would look no further than shares of Urban Logistics. This is a REIT that focuses on warehouses and storage facilities. It offers a very healthy dividend yield of 5.2%, which outstrips the average FTSE 100 yield of 4.5% by a considerable margin. Moreover, storage is a distinctly different sector to Shaftesbury-style commercial real estate: it is situated in areas that are relatively remote, it has much lower overheads costs and it has a different profit profile to other commercial spaces. That helps to give a portfolio diversity.

With the shares at 3,026p, British American Tobacco (LSE: BATS) trades on a forward-looking earnings multiple below nine for 2020, and the anticipated dividend yield is near 7.5%.

BATS looks like it’s out of favour with investors to me. But City analysts expect a rising dividend ahead. And in August’s half-year report, the directors said the firm is on track to achieve around 40% revenue growth per year from new categories of product, which looks set to more than offset ongoing declines from cigarette volumes.

I think the valuation is ripe for an upwards readjustment, perhaps through September and beyond. 

Kevin Godbold does not own shares in British American Tobacco.

Tom Rodgers: Greencoat UK Wind

Greencoat UK Wind (LSE: UKW) invests in and owns 35 UK wind farms, concentrated onshore in England and Scotland.

Its 25% debt-to-assets ratio is low considering the FTSE 250 firm spends hundreds of millions on buyouts, and there is huge potential here. The UK government is now committed to net zero emissions by 2050 and wind makes up 17% of the renewables market. 

UKW shares are also backed by a 4.8% dividend yield, covered 1.7x by earnings. Shareholder returns have also outperformed all its market rivals since 2013. I think it’s a cracking buy.

Tom Rodgers owns shares in Greencoat UK Wind.

Manika Premsingh: Just Eat

FTSE 100 share Just Eat (LSE: JE) saw a sharp spike in its share price in late July following a merger announcement with  Takeaway.com, which will make it the a largest food delivery service in the world. With this as the backdrop, it sounds contrarian to buy the shares now, but it’s worth noting that the price has since dipped in line with the broader Footsie decline. It’s now trading at 15% below its highest level in five years.

I reckon that as equity markets stabilise and investor confidence returns, this company will see a sharper run up in price than other FTSE 100 ones, given the growth potential now available to it. It might be best to buy it now.

Manika Premsingh has no position in Just Eat.

Karl Loomes: AstraZeneca

Suffering a setback to its Imfinzi lung cancer treatment towards the end of August, I believe the underlying fundamentals of AstraZeneca (LSE: AZN) still make it a strong investment.

Unlike many competitors, Astra has been showing a proven business model, particularly in China, to offset losses associated with generic drugs after patents run out. The result has been strong growth in the region and – combined with its drug portfolio – global sales, revenue and profits have all been climbing as a result. The share price is certainly not its cheapest, but I think we will be looking back at this level in a year’s time as a point when we should have bought.

Karl owns shares of AstraZeneca

Rupert Hargreaves: Future 

According to City estimates, profits at magazine publisher Future (LSE: FUTR) will surge more than 200% in 2019. This makes the firm one of the fastest-growing businesses in the FTSE 250, which is why I’m recommending it as my top stock for September. 

Based on current growth estimates, the stock is trading at a forward P/E of 26 – that’s hardly expensive considering the company’s projected growth. Earnings are set to jump another 12% next year, indicating a 2020 P/E of 23.

I’m excited to see what the future holds for this business as the company builds on its growth going forward. As Future was losing money until 2016, it does not offer much in the way of a dividend at present, but with profits set to surge during the next two years, that could be about to change…

Rupert Hargreaves has no position in Future.

Royston Wild: Highland Gold Mining

August’s proved to be a special month for Shanta Gold. It’s a share which I previously tipped because of an improving price outlook for the yellow metal, and I’m pleased to say that (as I type) the company’s value has risen around 20% since the turn of the month.

A worsening macroeconomic landscape means that there’s plenty more scope for bullion to gain ground, too, so why not play this trend through Highland Gold Mining (LSE: HGM), another top mining play?

The possibility of more metal price gains isn’t the only reason to buy Highland for September, though. Interims are slated for the 3rd and I’m excited to see what the company has to say for itself as production levels steadily improve and costs come down.

Oh, and right now Highland trades on an undemanding forward P/E ratio of 12.5 times, giving it ample space to rise in the coming weeks.

Royston Wild does not own shares in Highland Gold Mining or Shanta Gold.

Edward Sheldon: Legal & General Group

My top stock for September is financial services company Legal & General Group (LSE: LGEN).

After a strong start to the year, Legal & General shares have fallen over the last month as volatility has returned to equity markets. This has pushed the stock’s forward-looking P/E ratio down to around seven, while the dividend yield has risen to nearly 8%.

With the group delivering a solid set of half-year results in August, in which earnings per share were up 13% and the interim dividend was lifted 7%, I think the recent share price weakness has created an attractive buying opportunity for long-term investors.  

Edward Sheldon owns shares in Legal & General Group 

Ambrose O’Callaghan: Fresnillo

My top stock for September is Fresnillo (LSE: FRES). The spot price of silver has generated huge momentum in the month of August. This comes months after it had stagnated in gold’s shadow as investors have fled to safe havens.

Fresnillo is the top silver producer in the world, which makes it a highly attractive target in this environment. The stock was still down 26% year-over-year as of close on August 27, and shares were close to technically oversold territory. Fresnillo has room to run with the spot price of silver surging in the face of global economic anxiety.

September will be a big month in the lead up to the Brexit deadline, and Fresnillo offers nice value and exposure to silver.

Ambrose O’Callaghan has no position in Fresnillo.

Paul Summers: Unilever

September will likely be a pretty volatile month for markets. Regardless of whether a Brexit deal is agreed or not, I think most investors should be gravitating toward large stocks that don’t depend solely on the UK economy for their profits. 

My pick for next month is, therefore, Unilever (LSE: ULVR). As one of our biggest listed companies with exposure to markets all around the world, the Marmite-maker has the clout to survive whatever happens post-Halloween…

At 22 times forecast earnings, I suspect the current valuation reflects Unilever’s quality more than anything else. In contrast to some firms in the FTSE 100, the near-3% yield also looks secure.

Paul Summers has no position in Unilever

Kirsteen Mackay: John Wood Group

When John Wood Group (LSE: WG) acquired Amec in 2017 for £2.2bn, its debt level didn’t sit well with investors and the share price now sits close to its 52-week low.

Last week Wood Group announced it sold its nuclear business to Jacobs for £250m. This news was welcomed by shareholders as it helps bring the debt to a more manageable level.

The company reported a pre-tax profit of $62.2m for the first six months of 2019 from a $25.3m loss in the same period in 2018.

Management believes the group remains well positioned for growth. It has a price-to-earnings ratio of 45.9p and earnings per share of 8.5p. Its dividend yield is 7%. I think this share price will rise very soon.

Kirsteen Mackay owns no share mentioned.

Fiona Leake: Just Eat

Just Eat (LSE: JE) shares have sky-rocketed 25% at the end of July thanks to the huge share merger with Takeaway.com. Many have described the soon to be combined company as a huge “European powerhouse”. It certainly is very easy to see why, as the two companies combined received 360m orders worth €7.3bn in 2018.

Furthermore, Just Eat has already seen a 21% rise in orders during the first half of this year. On top of this, revenue has also risen by 30%. I truly believe that September could be the time to invest as I think that the share price will only continue to rise. I would be very interested in what further success this merger could bring.

Fiona Leake does not own shares in Just Eat.

G A Chester: Smiths Group

I’m seeing exciting prospects at several companies that are planning to unlock value for investors by a sale or demerger of part of their business. Smiths Group (LSE: SMIN), a FTSE 100 industrial technologies conglomerate, is one such company.

It intends to demerge its medical division in the first half of 2020. I’m making it my top ‘buy’ this month, because its annual results are due on 20 September, and I think these could be a catalyst for rising investor interest in the stock. Management turned down a bid for the division last year that I reckon values the group at around 50% higher than its current market valuation.

G A Chester has no position in Smiths Group.

Roland Head: Go-Ahead Group

Bus and train operator Go-Ahead Group (LSE: GOG) has seen its share price rise by about 30% over the last year. Investors have been encouraged by strong trading and a return to profit growth, after a difficult couple of years.

The company is due to publish its full-year results in early September. I expect a strong set of figures, as June’s trading update confirmed revenue growth throughout the business.

Although Go-Ahead shares aren’t as cheap as they were, a price tag of 12 times forecast earnings still looks reasonable to me. I believe further gains are possible. In the meantime, the 4.8% yield provides a useful income.

Roland Head owns shares of Go-Ahead Group.

Stepan Lavrouk: Shaftesbury

When it comes to real estate, I have a simple rule – do not bet against property markets in centres of first-tier cities. It is for this reason that I am very positive on Shaftesbury (LSE: SHB).

This West End-focused REIT has a history of both outperforming its market and of dividend increases. Although it currently yields just 2%, I believe that management could make good on its track record and continue to increase its payouts. I also believe that its quality real estate portfolio will prove to be resilient even in the case of a no-deal Brexit, especially compared to the wider market.

Stepan Lavrouk does not own shares in Shaftesbury.

Peter Stephens: British Land Company

With Brexit contributing to weak investor sentiment towards commercial property stock British Land (LSE: BLND), there could be a buying opportunity on offer for long-term investors. The REIT currently trades on a P/B ratio of 0.5, which suggests that it has a wide margin of safety.

Of course, the company faces an uncertain future due to an ongoing shift towards online retailing. In response, it is pivoting towards flexible office space and build to rent opportunities that are set to mitigate the impact of a retail slowdown on its wider portfolio.

With a dividend yield of over 6%, British Land could offer good value for money and income investing appeal.

Peter Stephens owns shares in British Land.

Go to the source

Ibstock (LSE: IBST) is the largest clay brick manufacturer in the UK. The value proposition here is relatively straightforward – the UK currently faces an acute housing shortage, most homes are made of brick, so producers of brick should do quite well. Ibstock controls over 25% of the total market, putting it in a good position when it comes to negotiating prices with housebuilders. 

As has been noted elsewhere on the Motley Fool, builders typically do not like to import bricks when they can buy them locally, as they are bulky and heavy. The combination of the national housing shortage, size, and geographical advantage over foreign competition suggests to me that Ibstock is well-positioned for the future. 

IBST current trades at just 13 times earnings, and at a yield of 5.3%. Although this yield is worse than some of the other FTSE 250 stocks out there, it is still good and I would prefer to pay slightly more for a dividend stream that I am confident will continue, than to take a chance on a higher yield that may not pan out. With a 20% return on capital employed last year and an 18% increase in free cash flow between 2017 and 2018 (from £55m to £65m), Ibstock should be able to continue the payouts.

Back a winner

For investors looking to gain exposure to the commercial real estate market, REIT Shaftesbury (LSE: SHB) offers an interesting opportunity. Its holdings are concentrated in London’s West End and include buildings in Covent Garden, Soho and Chinatown. When it comes to real estate, a lot of the time the simplest investment theses are the most compelling. Simply put, I believe that commercial space in central London is always going to be a highly sought-after commodity in the long run, even in the event of a disorderly Brexit. 

Shaftesbury currently trades at a 20% discount to its net asset value, mainly due to its low dividend growth. It has just a 2% yield, which may seem like too little for some income investors. However, I think that this is more than outweighed by the premium status of the assets operated by SHB, while the discounted price provides a good margin of safety. Historically, betting on major financial and commercial hubs like London has been a winning strategy, and one that I would stick with in this case.

With tax changes to buy-to-let, as well as a more difficult mortgage environment, buying real estate investment trusts (REITs) could be a shrewd move. They offer far greater diversity than a buy-to-let, can be tax-efficient when purchased in a Stocks and Shares ISA, and may deliver impressive income returns.

With that in mind, here are two FTSE 250 REITs that have a solid track record of dividend growth, and that appear to offer good value for money at the present time.

Workspace

Office and studio space provider Workspace (LSE: WKP) released an impressive set of final results on Wednesday. The company’s net rental income increased by 16%, with trading profit after interest rising by 19% to £72.4m. This enabled it to increase its total dividends per share by 20% to 32.87p.

Over the last five years, the company has increased its dividends at an annualised rate of over 25%. In the current year it is expected to post a further rise in shareholder payouts of around 14%, which would put it on a yield of 4.1%. This suggests that as well as offering an impressive income return and good value for money today, the company could also offer a rising share price as investor demand increases for a stock that has consistently-high dividend growth.

Therefore, with Workspace continuing to have a positive outlook in terms of rising demand for its offering, despite the political uncertainty faced in the UK, it could mean a superior risk/reward opportunity when compared to buy-to-let.

Shaftesbury

While the UK economy may face an uncertain period at the present time, London’s West End has historically been more resilient than many other locations. This could mean that West End-focused REIT Shaftesbury (LSE: SHB) outperforms the wider property market. Indeed, its recent updates have shown that the company is seeing continued strong demand for its units, as well as rising footfall that suggests it has a bright long-term future.

Although the company has increased its dividends at an annualised rate of 6.5% during the last four years, it has a dividend yield of just 2% at the present time. While this may not appear to be highly appealing to income-seeking investors, the stock has the potential to generate further above-inflation dividend growth over the long run.

With Shaftesbury currently trading on a price-to-book (P/B) ratio of 0.8, it seems to offer a wide margin of safety. When combined with its resilience to economic uncertainty and its capacity to raise dividends, this could mean that it offers an impressive total return over the long run that makes it more attractive than investing in buy-to-let.

Now, though, changes to the tax treatment of buy-to-lets, as well as uncertainty facing the UK economy, mean that listed property stocks could be better investments. With that in mind, here are two London-focused property stocks which could offer wide margins of safety and growth potential.

Improving outlook

Reporting on Wednesday was London-focused residential and commercial property business Capital & Counties (LSE: CAPC). Its results for 2018 showed that it has been able to deliver an upbeat performance despite the economic risks that have been in place. Its focus on Covent Garden and the West End has meant that its asset base has performed relatively well, with it having greater resilience than other parts of the UK.

The company experienced a record year for openings across its estate, with its net rental growth being 17%. Although there has been a valuation decline in its investments at Earls Court due to an uncertain performance from the residential property market, its overall property value increased by 1.6% to £2.6bn.

Looking ahead, the share price of Capital & Counties could generate improving performance. It trades on a price-to-book (P/B) ratio of just 0.75, which suggests that it offers a wide margin of safety. Given its diverse asset base and its focus on London, which has historically been a robust property market, its risk/reward ratio appears to be considerably more appealing than that of a buy-to-let.

Low valuation

Also offering an impressive long-term outlook is commercial property business Shaftesbury (LSE: SHB). The company has a solid track record of outperformance versus the wider industry, with its focus on London’s West End providing it with high demand for its various locations. Planning restrictions in its local area mean that supply is limited, while London’s rising population could lead to an improving financial outlook for the business.

The opening of Crossrail could lead to higher demand for the company’s properties, since the vast majority of them are located close to a Crossrail station. And while the outlook for the UK economy may be uncertain, London’s status as an international financial hub could mean that it is able to deliver impressive growth over a sustained time period.

Since Shaftesbury trades on a P/B ratio of 0.9, it appears to offer a significant margin of safety. Given the company’s track record of growth over a long time period, now could be the right time to consider its purchase instead of a buy-to-let. Doing so may reduce an investor’s risk, while allowing them to participate in London’s continued growth story.