I think these income stocks are terrific buys for long-term investors. Here’s why I expect them to deliver market-beating returns over the next decade.
The PRS REIT
Real estate investment trusts (or REITs) can be great ways for investors to supercharge their passive income.
The regular contracted rents they receive usually provide them with financial firepower to pay big dividends year after year. Furthermore, these firms are obligated to pay nine-tenths of annual profits out by way of dividends,
The PRS REIT (LSE:PRSR) is one such property stock I think is a great buy for investors. As the name implies, this UK share is focused on providing accommodation in the private rental sector (or PRS). This market is suffering a severe supply and demand imbalance which, in turn, is driving rents skywards.
Illustrating this point, the Royal Institute of Chartered Surveyors (RICS) recently noted that “tenant demand continues to increase” while “landlord instructions continue to decline.” It said that “the headline rent expectations reading remains at a relatively high level of +45%” and that “this pattern is repeated across much of the country”.
Shortages are particularly severe in the family home sector. This benefits PRS given its focus on this part of the rentals market. The business has almost 5,000 completed homes on its books and a further 613 in various stages of development.
Changes to rental legislation could impact the REIT further down the line. But as things stand, I believe the company’s a great way to make dividend income. For this financial year its dividend yield sits at a market-beating 4.6%.
Ibstock
I believe that Ibstock (LSE:IBST) is another top share for investors to buy and hold for the long haul. I’ve even put my money where my mouth is. I’ve owned this FTSE 250 stock since 2017.
As mentioned above, property shortages in the UK rental market are severe. The sales sector is also suffering a significant supply imbalance. As a consequence Britain will have to supercharge homebuilding over the next decade.
This is where Ibstock stands to profit. The company is the country’s largest brick manufacturer by volume. And it’s investing heavily to make the most of the upcoming construction boom.
Last year it acquired a fireproof cladding and a glass reinforced concrete (GRC) firm to expand its product ranges. It’s also building a £50m brick slips factory in West Yorkshire with an annual capacity of 60m slips. These recent investments are also intended to capitalise on soaring demand for more environmentally-friendly building products.
Things aren’t all rosy for Ibstock and investors like me. Demand for its bricks has softened more recently due to turbulence in the housing market. This trend could continue too if interest rates keep rising and the cost-of-living crisis rolls on.
That said, from a long term view, I believe the brickmaker’s trading outlook remains robust. And so I expect it to remain an attractive source of passive income. By the way, its dividend yield for 2023 sits at a juicy 5.2%.
