Real estate investment trusts (REITs) offer a combination of high dividend yields, potential for growth, and diversification benefits, making them an attractive option to consider for investors seeking passive income.
Here are a handful owned across the Fool.co.uk contract writing team!
Primary Health Properties
What it does: Primary Health Properties specialises in purchasing and renting primary healthcare facilities within the United Kingdom and Ireland.
By Mark Hartley. Primary Health Properties (LSE: PHP) is a real estate investment trust (REIT) that benefits from stable revenue through long-term leases backed by the NHS and Irish government. This makes it a good candidate for passive income, as it’s low-risk and provides consistent dividend payouts
It has a long track record of dividend growth and has seen moderate price appreciation during strong economic periods. Dividends have increased consistently for over 20 years at a compound annual growth rate of 3.24%.
However, the price has suffered during periods of high interest rates, ramping up borrowing costs and impacting profitability. Recent concerns about the wider property sector and potential government healthcare policy change risk hurting the share price.
Despite a slight decline in performance over the past three years, revenue and earnings have typically been within 1% of expectations. This makes it attractive to income investors looking for stable and reliable performance.
Mark Hartley owns shares in Primary Health Properties.
Primary Health Properties
What it does: Primary Health Properties owns and lets out medical facilities like GP surgeries in the UK and Ireland.
By Royston Wild. Primary Health Properties offers investors the dream blend of long-term dividend growth and market-beating dividend yields.
Cash rewards here have grown every year since the mid-1990s. And City analysts expect this trend to continue until at least 2026, representing 30th consecutive years of rises.
As a result, the yields on Primary Health Properties for this year and next stand at 7.6% and 7.7% respectively. To put that into perspective, the current forward average for FTSE 250 stocks sits way below these levels, at 3.4%.
This REIT’s dividend durability reflects its focus on the ultra-defensive healthcare market, providing profits stability across the economic cycle. It’s also because the lion’s share of rental income is directly or indirectly guaranteed by a government body.
Looking ahead, future dividends could be hurt by NHS policy changes that impact earnings. But with successive governments working to strengthen the role of primary care in Britain, the outlook here for the short-to-medium term at least looks pretty solid.
Royston Wild owns shares in Primary Health Properties.
Supermarket Income REIT
What it does: Supermarket Income owns a £1.8bn portfolio of 74 stores, with the majority leased to Tesco and Sainsbury’s.
By Roland Head. Big UK supermarkets have regained their status as desirable retail properties since the pandemic. I added Supermarket Income REIT (LSE: SUPR) to my portfolio in July 2024, tempted by the 8%+ dividend yield and near-20% discount to book value.
Admittedly, there’s a risk that higher interest rates will put pressure on the dividend. But my sums suggest that this REIT will be able to refinance while maintaining its dividend.
Recent changes should deliver a sharp drop in management costs. This REIT also benefits from long leases and very reliable tenants. Occupancy is 100% and so is rent payment.
Property valuations also seem realistic – another area of possible concern. During the second half of 2024, Supermarket Income sold Tesco’s Newmarket store back to the retailer at a price 7.4% above its latest book value.
With a forecast yield of 8.3%, I’m quite happy to sit back and collect my quarterly dividends.
Roland Head owns shares in Supermarket Income REIT.
Warehouse REIT
What it does: Warehouse REIT owns and leases a portfolio of well-positioned warehouses across the UK catering primarily to the e-commerce industry.
By Zaven Boyrazian. In a world where e-commerce continues to slowly take market share from brick-and-mortar retail, demand for well-positioned warehouses is growing. This is a trend that Warehouse REIT (LSE:WHR) has been busy capitalising on since its IPO in 2017.
However, with interest rates rising rapidly in 2022, real estate investment trusts have had to endure much higher financial pressures. In the case of Warehouse, that ultimately culminated in property disposals to keep debt in check.
Despite this, dividends have kept flowing. And while elevated interest rates are still a cause for concern, the sell-off by investors seemed a bit overblown. It seems the private equity markets have also come to the same conclusion since acquisition offers began flying in February 2025. So far, they’ve all been rejected.
Even after the recent rise in stock price, the shares continue to offer an attractive 6.5% dividend yield. And with demand for warehouses unlikely to slow down in the long run, the passive income potential for Warehouse REIT continues to look rock solid, in my opinion.
Zaven Boyrazian owns shares in Warehouse REIT.
This post was originally published on Motley Fool
