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Questor: after the stock market storm, these are the income stocks to buy
Now that stock markets have steadied after the recent panic it is time to assess the damage to Questor's Income Portfolio.
Far from being the complete rout many predicted (and perhaps hoped for) the FTSE 100 has simply settled back at its September 2017 level.
Yet some of the portfolio's 17 stock holdings lost far more value than others. This creates an opportunity for bargain hunters, although, because our £500,000 is fully allocated, the portfolio itself cannot be topped up just now.
If expert opinion is right and the recent market jitters mark the "return of volatility" after years of calm, these opportunities will present themselves more frequently (the prices of our seven fixed interest assets barely moved, however).
National Grid, Renew Holdings, the engineering group, and Crest Nicholson, the housebuilder, are among those to have fallen furthest since Jan 12, when the blue-chip index hit its record high. The FTSE 100 itself has lost 6.9pc over the same period, while these three stocks all suffered close to, or more than, double-digit percentage point falls.
We bought National Grid in October 2016 at £10.58. As with many of our holdings (remember, the portfolio has a 5pc annual income target) the attraction was its yield, and we've received £3,320 in dividends so far on our £25,000 investment. The 18.6pc share price fall since the highs of January are just part of a longer nosedive since a peak of £11.50 in May last year. At our initial purchase the yield was around 4pc; at today's price it is more than 6pc.
Energy markets are under constant threat of political interference but National Grid's monopoly status means it is not nearly as exposed as the big energy suppliers.
In any case, National Grid's growth market is now the US, where, under president Trump's administration, threats to revenue streams are far less likely. The business's commitment to raising dividends in line with inflation is unchanged. Questor rates it a "buy".
Renew Holdings, down 8pc since Jan 12, is also exposed to energy markets but, through its eight subsidiaries, also derives income from transport, water and high-end residential property. Unlike National Grid, Renew's recent share price fall is not part of a longer-term decline.
Turnover, profits and dividends rose last year and Questor expects the share price to recover. Even at yesterday's price of 400p Renew yields just a little over 2pc but we have high hopes for dividend growth. Buy.
Last month we reiterated our conviction in housebuilder Crest Nicholson after its results showed a strong pipeline of forward orders, chunky profit margins and the promise of more dividend increases.
We bought at 435p in November 2016 when investors' excessively pessimistic view of domestically focused companies in the wake of the Brexit vote pushed prices down too far.
Encouragingly, the developer has resumed its land purchases, which it had paused following the referendum. Demand for residential property, and interest rates still at historic lows, remain supportive.
The price has recovered since our purchase but Crest is still excellent value, with the yield at the current price touching 7pc. Income of this magnitude from quality companies is hard to find. New investors are in good company: Neil Woodford, the £9bn fund manager, doubled his stake this week. Follow suit and buy.
Update: Regional Reit
Quoted property trust Regional provides the portfolio's exposure to commercial property in the South East but, crucially, outside the M25.
At the end of 2017 the company secured a £165m refinancing package (at a highly competitive fixed rate) that extended the term of average debt across the group. The deal gives Regional the flexibility it needs to continue its aggressive acquisition strategy.
One of the portfolio's oldest holdings, we bought it at 103p in October 2016. The price has been either flat or slightly down in the months since but it is the income we're interested in and Regional has not disappointed. It has paid out £1,085 on our £15,000 investment.
questor@telegraph.co.uk