Want dividends? I like these top real estate investment trusts

Paul Summers highlights three real estate investment trusts that look likely to remain great sources of income in these troubled times.

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Finding reliable sources of income from the stock market has become a lot harder in recent months as firms have rushed to cut their dividends due to the coronavirus pandemic. Today, however, I’m looking at three real estate investment trusts that should retain their policies through the current crisis and beyond.

Tritax Big Box

First up is warehouse provider and FTSE 250 member Tritax Big Box (LSE: BBOX). With a portfolio value approaching £4bn, tenants include top tier stalwarts Next and Unilever as well as US giant Amazon

Thanks to Covid-19 showing yet again just how convenient/essential online shopping has become, I find it hard to be anything but bullish on Tritax’s share price over the long term. A looming recession may force many to tighten their purse strings temporarily, but the e-tail boom clearly has a lot further to go. 

And dividends? Right now, this real estate investment trust yields a chunky 5.1%, based on analyst estimates of a 6.72p per share payout in 2020. For context, only five companies in the FTSE 100 are yielding more (and I suspect one of these — BP — will need to cut at some point).   

Big cash returns, solid growth prospects: What’s not to like?

Primary Health Properties

The second real estate investment trust I think should remain a good pick for income investors, particularly after the last couple of months, is Primary Health Properties (LSE: PHP). As you may have guessed, this company invests in the freehold or long leasehold of primary healthcare facilities.

PHP’s portfolio currently consists of 510 properties, the vast majority of which are GP surgeries. Other assets are let out to NHS organisations, dentists and pharmacies. Importantly, nearly all of the rental income is backed by the government. This should give investors far more confidence that payouts will be maintained compared to elsewhere in the market.  

Unsurprisingly, a stampede for relatively ‘safe’ income havens means that the shares currently trade on a hefty premium to their net asset value. Notwithstanding this, I think buying now can still be justified based on the non-cyclical nature of its business. The likelihood that demand for healthcare will only grow due to an ageing UK population is also a big draw.

PHP currently yields 3.8%, which puts it roughly on par with a stock like Tesco. Speaking of which…

Supermarket Income REIT

The days of panic-buying toilet paper are long gone. However, the coronavirus crisis has still succeeded in highlighting just how defensive investing in the UK’s supermarkets can be. My third and final pick from this area is, therefore, Supermarket Income REIT (LSE: SUPR)

The £500m trust rents out property to FTSE 100 titans Sainsbury’s, Morrisons and the aforementioned market-leader, Tesco. Walmart-owned Asda is also a tenant. 

In SUPR’s view, the fact that supermarket property yields have climbed in recent years is a reason to get involved. The trust aims to buy property in highly-populated residential areas, with strong transport links. An average lease of more than 15 years is also sought. Combined, these should give investors a stable source of income that rises with inflation.

SUPR is likely to return 5.8p per share in this financial year (ending June 30). Based on the current share price, this gives holders of this real estate investment trust a forecast yield of 5.4%. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Primary Health Properties and Tritax Big Box REIT. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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