As a passive income seeker, I look for the best UK shares that are designed to pay out regular and consistent dividends.
Two of the stocks I own are real estate investment trusts (REITs). As a quick reminder, a REIT is a business set up to make money from income-yielding property. They are legally required to return 90% of profits to shareholders.
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I must note there are risks to investing in REITs to boost my passive income stream. As with any dividend stock, dividends are paid at the discretion of the business, meaning they can be cancelled at any time. Furthermore, if a REIT cannot rent out or collect rent from its properties, it cannot generate a profit and pay a dividend.
Passive income stock #1
Supermarket Income REIT (LSE:SUPR) invests in supermarket-related property in the UK. One of its core aims is to provide inflation-linked income. In fact, over 80% of the business’s rental income is tied to inflation. With inflation currently rising, Supermarket’s rental income should increase, in turn, increasing my returns.
So what’s the current state of play with the Supermarket share price? Well, as I write, the shares are trading for 127p. At this time last year, the shares were trading for 118p, which is a 7% increase over a 12-month period.
I view the grocery business as a defensive option. Despite the current macroeconomic outlook and cost of living crisis, people need to eat. This tells me that retailers will need the kinds of properties in Supermarket Income REIT’s portfolio.
As well as favourable market conditions, Supermarket shares carry an enticing dividend yield of close to 5%. This is higher than the FTSE 100 average of 3%-4%. The shares also look good value for money right now with a price-to-earnings ratio of just nine.
Finally, Supermarket’s performance historically has been excellent. I do understand that past performance of UK shares are not a guarantee of the future, however. Looking back I can see it has grown revenue and profit year on year for the past four years.
I have owned Supermarket shares for some time now and may add more soon to boost my passive income stream.
The second stock is Primary Health Properties (LSE:PHP). It is a REIT that specialises in the purchase, development, and ownership of primary healthcare premises in the UK and Ireland. An example of this is GP surgeries.
Let’s look at Primary’s share price now. As I write, the shares are trading for 136p. At this time last year, the shares were trading for 157p, which is a 13% drop over a 12-month period.
I believe Primary Health Properties has defensive attributes too. Healthcare demands have only increased in the UK and Ireland due to an ageing and growing population. If Primary Health Properties can continue to provide quality locations, it should continue to yield rental income and boost returns in the form of dividends for passive income seekers like myself.
So what about the dividend yield? Well, the shares have a yield of 4.5% currently, which is also higher than the FTSE 100 average. The shares are a bit more expensive than Supermarket Income, on a price-to-earnings ratio of 14.
Primary also has a good track record of performance. Looking back I can see it has grown revenue and profit for the past three years in a row.
Like Supermarket Income and many of my UK shares that pay a dividend, I intend to hold my position in Primary Health Properties for the long term to boost my passive income stream.