Theme park operator LondonMetric can boost your finances: MIDAS SHARE TIPS

Nemesis is consistently considered one of the most exciting roller coasters in the world. A highlight for anyone who enjoys hanging upside down and hurtling through the air at speeds of 80 km/h.

Nemesis has recently been modernised and is now a top attraction at Alton Towers, attracting over two million visitors a year, with around 7,000 a day in the summer.

Alton Towers in Staffordshire is Britain’s largest theme park, with its thrill-packed partner, Thorpe Park in Surrey, a close second.

Their landlord is LondonMetric, a real estate company that has delivered nine consecutive years of dividend growth and is expected to deliver a decade of growth by the end of this year.

LondonMetric shares are trading at £2.01 and are expected to rise as CEO Andrew Jones is highly experienced, the company is purposefully focused on high-growth sectors of the economy and it is financially healthy.

Immediately after leaving the board of industrial giant British Land, Jones founded Metric Property Investments in 2010.

Three years later he merged the company with a rival firm and LondonMetric was born. Since then there have been several deals, most recently an all-share merger with LXi, another UK property group firmly focused on delivering income to shareholders.

Today the expanded company owns 580 properties across the UK, from Inverness in Scotland to Truro in the heart of Cornwall.

While Alton Towers and Thorpe Park are major tenants, warehouses and other logistics hubs account for more than 40 per cent of the portfolio’s value.

Primark’s main distribution centre was developed by LondonMetric. It covers over 187,000 sq ft, is spread over four floors and generates annual rent in excess of £5 million.

Other major tenants include Amazon, Royal Mail and DPD, but many smaller companies also rent distribution space, ranging from microbreweries to coffee roasters and DIY stores.

Outside of logistics, private hospitals and budget hotels make up a large part of rental income, along with edge-of-town supermarkets and discount stores, from Waitrose and M&S to Aldi and B&M.

The merger with LXi was a smart move, bringing LondonMetric into the FTSE 100 index and making it more attractive to large institutional investors and better able to raise cheap finance. However, the group should also be attractive to individual shareholders.

Many real estate companies not only rent out locations, they are also responsible for managing them. For example, they make sure the elevators are working, the lights are replaced, the parking lots are clean, and so on.

Jones takes a different approach, known in real estate circles as triple net. He offers land and buildings, but lets tenants manage them. That allows him to keep costs low, so he can pay out big dividends — which he does.

The dividend rose 7% to 10.2p for the 12 months to March 2024, with analysts expecting a payout of 12p for the current year, giving LondonMetric a yield of 6.25%.

The group also pays out dividends every quarter, so investors get a nice boost every three months.

Generous dividends are supported by strong growth across the business. Rental income rose 20 per cent last year to £177m, with occupancy levels of over 99 per cent and only a handful of smaller tenants taking extra time to pay.

Rents are expected to reach almost £400m this year, following the LXi merger. The deal will also deliver material cost savings, boosting revenue growth.

LondonMetric has grown over the years to be a reliable landlord. Leases of 20 years are common, which means that companies are committed to working with the company for the long term.

Rents are reviewed regularly and in 80 percent of cases there is a contractual increase. Rents therefore increase annually or every five years, which forms a solid basis for dividend growth.

MIDAS VERDICT: Real estate companies are having a tough time, but it appears the cycle is turning and LondonMetric is well positioned to benefit.

Leases are long, tenants operate in fast-growing sectors and many are blue-chip names. At £1.91 the shares are a bargain and generous dividends add to their appeal.