Should I buy this REIT to boost my passive income with its 6%+ yield?

Jabran Khan is looking to boost his passive income stream and takes a closer look at this real estate investment trust.

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One of my primary aims when buying shares for my holdings is to boost my passive income stream. I’m currently considering adding Triple Point Social Housing REIT (LSE:SOHO) to my holdings. Should I buy or avoid the shares?

Social housing REIT

As a quick introduction, Triple operates as a real estate investment trust (REIT). This means it invests in, and yields income from, operating property — social housing projects, specifically. It focuses on supported living housing for vulnerable people with complex care needs. As a REIT, it must return 90% of profits to shareholders in the form of dividends. This is what makes it attractive to me as a potential stock to boost my passive income stream.

So what’s happening with Triple shares currently? Well, as I write, they’re trading for 84p, making it a penny share. At this time last year, the stock was trading for 97p, which is a 13% decline over a 12-month period.

A passive income stock with risks

I believe that Triple’s performance and investment viability could come under threat due to the impending care reforms in the UK. The reforms coming in next year could put a cap on social housing amounts for adults in need, which could negatively affect Triple’s demand and the amount of money it could make. In turn, this could affect the return to shareholders. Furthermore, as a result of the current economic climate, the government is looking to cut costs across the board. Social housing budgets could be slashed, which would also affect firms like Triple.

Finally, as with any dividend stock, I must remember that dividends are never guaranteed. They can be cancelled at the discretion of the business at any time. This can particularly occur during times of economic volatility, like now, to conserve cash.

The bull case and what I’m doing now

So let’s take a look at some positives. Firstly, I can see that Triple’s dividend yield currently stands at 6.3%. This is higher than the FTSE 100 and FTSE 250 averages of 3%-4% and 1.9%, respectively. I am also buoyed by the fact that it has paid all dividends since the company formed in 2017. In addition to this, the shares look decent value for money right now on a price-to-earnings ratio of just 11.

Next, I can see Triple has a good track record of performance. I do understand that past performance is no guarantee of the future. However, looking back, I can see it has increased revenue for the past four years in a row. This will have supported its consistent dividend for this period. Furthermore, its most recent trading update was positive. This was a full-year report for the year ended 31 March 2022. It reported that revenue, rental income, profit, and dividend all increased compared to 2021.

Finally, I believe Triple could benefit from surging demand for homes, including social housing, in the UK. Demand is outstripping supply currently. Triple could leverage this demand to boost performance as well as returns moving forward.

To summarise, based on the positives noted above, I believe Triple Point Social Housing REIT could be a great stock to boost my passive income stream. I already own a number of REITs as part of my holdings and would happily add Triple shares to this too.

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 assessed. Consider taking independent financial advice.

Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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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