I bought this 4% dividend yielding stock to boost my passive income stream!

This Fool explains why he purchased shares in a REIT to boost his passive income.

| More on:
Passive income text with pin graph chart on business table

Image source: Getty Images

I am on the lookout for stocks to boost my passive income stream through dividend payments. One stock I purchased a few months ago to do this is Warehouse REIT (LSE:WHR).

Warehouse specialists

Warehouse REIT is a business that is set up to purchase, revamp, and rent out warehousing space to businesses to help growth.

A real estate investment trust (REIT) is a business set up to yield income from rent-producing property. As part of this setup, 90% of profits must be paid to investors.

So what’s happening with the Warehouse share price currently? Well, as I write, the shares are trading for 152p, which is the exact same figure the shares were trading for at this time last year. The shares have dropped 13% since early April, when they were trading for 176p. I believe this is because of the stock market correction due to macroeconomic pressures and geopolitical issues.

Why I added the shares to my holdings

For a stock to boost my passive income stream, it must have two vital components, in my opinion. The first one is a good track record of performance. This performance underpins dividends. I do understand past performance is not a guarantee of the future, however.

Looking back, I can see Warehouse REIT has grown revenue and profit for the past four years in a row. Coming up to date, in May, it released a full-year update for the period ending 31 March 2022. The results showed great growth with gross property income, profit, and its portfolio size increasing compared to 2021. Crucially, its dividend per share increased too.

So what’s the next component? For me it is its dividend record and dividend yield. Warehouse’s dividend record is consistent. Its current dividend yield is just over 4%. This is higher than the FTSE 100 average of 3%-4%. As a bonus, the shares look relatively cheap currently on a price-to-earnings ratio of just over three.

Finally, the current demand for warehousing space is growing. This was also a factor in helping me decide to buy the shares. Demand for warehousing space is currently outstripping supply. The e-commerce boom coupled with pandemic restrictions has also led to businesses needing warehousing space. Firms like Warehouse are primed to benefit.

Passive income stocks have risks too

One of the biggest risks of any dividend stock is the fact that dividends are never guaranteed and are paid at the discretion of the business. Warehouse could cancel dividends if performance levels dropped. A prime example of dividends being cancelled by many companies was when the pandemic struck in 2020 and businesses looked to conserve cash.

I also believe there is a risk that the demand for warehousing space coupled with the low current supply could meet. This convergence could result in performance of businesses like Warehouse REIT being negatively affected.

Despite the risks mentioned, my investment strategy has always been to buy and hold for the long term. I believe Warehouse REIT will continue to pay a consistent dividend and boost my passive income stream for years to come. Warehouse REIT is one of a number of REITs that I own as part of my portfolio.

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.

Jabran Khan owns shares in Warehouse REIT. The Motley Fool UK has recommended Warehouse 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.

More on Investing Articles

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

With a spare £500 I’d buy these UK shares

A financial services giant, a FTSE 250 distributor, a FTSE 100 tech stock, and a gold miner are on the…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Should I buy this defensive FTSE 100 stock for growth and returns?

This Fool takes a closer look at a FTSE 100 stock to see if it could boost his holdings via…

Read more »

Young female analyst working at her desk in the office
Investing Articles

I robbed Mr Market of this cheap FTSE stock!

This FTSE 250 stock has crashed by almost 30% in six months. But I recently bought into this battered business…

Read more »

Mature people enjoying time together during road trip
Investing Articles

3 reasons I’m backing NIO shares to soar!

NIO shares have bounced up and down this year. But where will the share price go next? My bet is…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Up 300%, is the Hurricane Energy share price an opportunity too good to miss?

This Fool looks at why the Hurricane Energy share price has soared in the past 12 months. Should he buy…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

The BT share price crashes 20% in a month. Buy now?

The BT share price has crashed by almost a fifth since coming close to £2 on 12 July. After this…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

How I’d invest £1,000 in growth shares today to target £5,000 in a decade

Our writer reckons he could do well by choosing the right growth shares today and holding them in his portfolio…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

How passive income from stocks can speed up early retirement

By investing patiently over the years, buying quality shares has given me enough passive income to retire 10 or even…

Read more »