Real estate investment trusts (REITs) are popular with UK investors. It’s not hard to see why. Not only do REITs have the potential to deliver capital gains and dividends, but they can also help diversify a share portfolio due to their exposure to the real estate market.
Here, I’m going to highlight three UK real estate investment trusts that I believe are attractive investments. I think these are three of the best REITs to own for 2020 and beyond.
Top UK real estate investment trusts
One of my favourite REITs is FTSE 250 constituent Tritax Big Box (LSE: BBOX). It’s a leading real estate company that focuses on logistics real estate. It owns and manages sophisticated warehouses and lets these out to major retailers such as Amazon, Tesco, and DHL.
There are a number of reasons I think Tritax is one of the best UK REITs to own. Firstly, it’s very well placed to benefit from the ongoing shift to online shopping. As we do more of our shopping online, retailers are going to need more access to the kind of strategically-located distribution warehouses that Tritax owns.
Secondly, BBOX has built up an impressive track record in recent years. For example, it has now put together five consecutive dividend increases.
BBOX shares currently trade on a forward-looking P/E ratio of about 22.9 and sport a prospective dividend yield of 4.3%. I think those metrics are attractive.
Attractive dividend yields
Another real estate investment trust I like is Primary Health Properties (LSE: PHP). It’s a FTSE 250-listed REIT that focuses on healthcare facilities. Its portfolio comprises roughly 500 healthcare facilities across the UK and Ireland, the vast majority of which are GP surgeries.
One reason I like PHP is that the company is well placed to benefit from the UK’s ageing population. According to Age UK, by 2030, more than 20% of the UK population will be aged 65 or older. This means demand for healthcare should be high.
Another reason I like this REIT is that a large proportion of its rental income is backed by the UK government. This means the stock offers a high level of security.
PHP shares currently have a forward-looking P/E ratio of about 25.5. That’s not cheap, but this stock is worth a premium, in my view. The prospective dividend yield on offer is about 4%.
A highly resilient REIT
Finally, I also like the look of Safestore (LSE: SAFE). It’s a FTSE 250-listed REIT that specialises in self-storage solutions. It currently has around 160 stores across the UK and Europe.
There are a few reasons I see investment appeal here. Firstly, demand for self-storage in the UK remains strong. Annual turnover for the industry was £766m in 2019, up from £540m in 2016.
Secondly, self-storage is a resilient business. This is illustrated by the fact that the company recently reported a 9% increase in revenue for the six months to 30 April. That’s impressive in the midst of a global pandemic. “We believe the resilient characteristics of the self-storage industry place the business in a strong position to withstand the economic uncertainty arising from Covid-19,” the company said.
SAFE shares currently trade on a forward-looking P/E ratio of 24.5 and offer a prospective dividend yield of 2.5%. Once again, that’s not cheap. However, this is a high-quality REIT that deserves a premium valuation, I feel.
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Edward Sheldon owns shares in Tritax Big Box REIT. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Primary Health Properties, Tesco, and Tritax Big Box REIT and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. 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.