Real estate income trusts (or REITs) can be great income stocks to buy to generate long-term wealth.
They enable investors to pool money in order to buy properties that would be unattainable on smaller budgets. These investment vehicles also give individuals a chance to invest in sectors that might also be out of reach, like hospitals, retail parks, and office blocks.
Pleasingly REITs receive certain tax advantages by being registered as such. And this can have a big advantage for dividend investors. Under sector rules, these property shares must pay a minimum of 90% of annual profits out by way of dividends.
2 top REITs for investors
This perk prompted me to buy Primary Health Properties and Target Healthcare REIT for my Stocks and Shares ISA. And I’m considering adding to my REIT holdings to boost my passive income even further.
Here are two of these top income stocks for savvy investors:
Primary Health Properties’ latest financials last week underlined why medical property specialists like Assura (LSE:AGR) are such attractive stocks right now. Even as the UK economy splutters, rental income can still be expected to grow.
Net rental income at Primary Healthcare Properties rose 3.5% in 2022, a result that pushed adjusted earnings 6.6% higher. This allowed the business to raise the annual dividend to 6.6p per share from 6.2p, the 27th straight annual rise.
Healthcare is one of the most recession-resistant sectors out there. Demand for medical services remains robust at all points of the economic cycle. And businesses like Assura carry an extra layer of security as their rents are mostly guaranteed by government bodies.
REITs like this have terrific growth potential, too, driven by demographic changes in the UK. As the elderly population grows, demand for primary healthcare facilities like doctor surgeries and diagnostic centres will also shoot higher.
Changes to NHS policy could hit earnings. But on balance I’m expecting big things from shares like this.
For this financial year to March 2023, Assura carries a 6% dividend yield. The figure marches to 6.3% for the following fiscal year, too. I think this is a great share for passive income now and in the future.
#2: Ediston Property Investment Company
Tough conditions for British consumers put retail property owners in some immediate danger. This includes Ediston Property Investment Company (LSE:EPIC), a retail park operator that might see demand for its shopping warehouses falter.
But I believe the REIT is still a great buy for long-term investors. Changing consumer expectations mean that retailer interest in shopping warehouses is growing.
The modern shopper enjoys larger stores that are easy to reach and offer free parking. They also serve an important role for online consumers with the steady rollout of click-and-collect services. Finally, retail parks offer a greater variety of shops than before and this is attracting people away from the high street.
A supply crunch hasn’t yet transpired in the retail park sector. But the chances of one developing are high, and this could give rental income at businesses like Ediston a big boost.
The business carries a mighty 7.9% dividend yield for the financial year to September 2023. I expect it to keep delivering market-beating yields for a long time, too.