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While the UK State Pension is far from terrible compared to other countries around the world, it’s still not sufficient to maintain a decent retirement lifestyle alone. That’s why having a separate stock portfolio generating additional retirement income is essential.
So let’s say an investor wants to double their State Pension income with another £12,547.60 a year coming from dividends. How big does that portfolio actually need to be?
Should you buy Safestore Plc shares today?
Before you decide, please take a moment to review this report first. Despite ongoing uncertainties from US tariffs to global conflicts, Mark Rogers and his team believe many UK shares still trade at substantial discounts, offering savvy investors plenty of potential opportunities to learn about.
That’s why this could be an ideal time to secure this valuable research – Mark’s analysts have scoured the markets to reveal 5 of his favourite long-term ‘Buys’. Please, don’t make any big decisions before seeing them.
It all comes down to yield
The required portfolio size ultimately depends on the yield it produces. Right now, the FTSE 100 offers a payout close to 3%. So for anyone planning to piggyback off of a passive index fund, a retirement portfolio will need to be valued at close to £418,253 to generate £12,547.60 from dividends alone.
But if the same investor decides to pick quality individual income stocks directly and targets a yield closer to 5%, the required portfolio size drops almost in half to £250,952.
Needless to say, hitting the same income goal with around £167,300 less is an attractive prospect. But as experienced investors know, higher yields often come with higher risks. So which UK income stocks should I be considering today?
A self-storage giant hiding in plain sight
Looking at my own income portfolio, Safestore Holdings (LSE:SAFE) stands out as one of my top picks right now, with a 4.92% dividend yield.
The self-storage market in Europe is significantly underdeveloped compared to UK standards. But that’s starting to change. And Safestore is already making moves to replicate its UK market-leading success. And the results are already starting to materialise…
During the six-month period ended in April, Safestore’s total revenue grew by 6.9% to £120.6m. But when looking exclusively at non-UK income, growth from its expansion markets landed at 16.8% on a like-for-like basis. And while its UK growth is slower, there are signs of momentum picking up in its core market as well.
Pairing all that with the adoption of artificial intelligence (AI) to help guide pricing decisions based on the company’s rich 28 years of data, Safestore looks like a top-notch income opportunity that’s fallen under most investors’ radar.
So is now a terrific time to think about buying?
What could go wrong?
Self-storage is a relatively easy sector to enter with low barriers to entry. And if smaller regional operators start undercutting on price to fill excess capacity, Safestore’s ability to keep pushing UK and EU rates higher could come under pressure.
There’s also the financing risk to consider. Net finance costs are set to rise a further £2m-£3m this year as floating interest rates stay elevated. And at the same time, the firm’s loan-to-value has crept up to 29.1% as management continues to fund its store expansion programme.
So far, debt remains comfortably within manageable territory. And seeing the company continue to invest in growth while most of its rivals are battening down the hatches is actually an encouraging sign. But if interest rates suddenly start climbing again, that financial flexibility could disappear quickly.
Nevertheless, with a proven track record and 16 years of continuous dividend hikes, Safestore looks like an excellent income stock to consider for investors who want to avoid being solely reliant on the State Pension. That’s why it’s already in my income portfolio. And it’s not the only one…
What income stock do we like better than Safestore Plc right now?
One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.
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No jargon. No hard sell. Just a clear look at an income share we think is worth your time.
Zaven Boyrazian owns shares in Safestore Holdings.