In terms of income generation, some of the best options in the market are real estate investment trusts (REITS).
The dividend forecasts for some of these REIT’s are juicy. In part, this is because to achieve favourable REIT status, the firms have to pay out a set amount of profit as dividends. Here’s one that I’ve got my eye on.
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Starting with the business
The REIT in question is Triple Point Social Housing (LSE:SOHO). As the name suggests, the business invests in social housing projects around the UK. It currently has a portfolio of 493 sites, which generate income as part of the lease agreements.
The share price is down 27% over the past year. From my perspective, this hit has come as investors are concerned about the overall portfolio value for Triple Point. We’re all aware of how shaky the property market is at the moment, so the share price fall has reflected this point.
However, given the business model of regular income, Triple Point has been regular in paying out quarterly dividends to shareholders. For the past year, the dividend amount has been 1.365p per share. This gives a total annual figure of 5.46p. Using the share price of 51.6p, the dividend yield is 10.58%.
Looking forward
When I consider the forecast for 2024 and 2025, the dividend per share is expected to rise. From 1.365p, the Q1 2024 number is forecasted to jump to 1.4p. In 2025, this is expected to rise to 1.43p.
So the sum of 2024 payments could total 5.6p, with the 2025 figure at 5.72p. Given that the business model has been proven over several years, I don’t see any material reason why the dividend payments shouldn’t be achieved.
The focus now turns to what the yield could be. After all, the dividend per share is only one component of calculating the yield. The other part is the share price. This is where the difficulty comes. I have no idea what the share price will be in 2025!
I could use the assumption that it stays at the current price of 51.6p. In that case, the yield would be 10.85% in 2024 and 11.08% in 2025. Investors who use a different example share price can get a higher or lower projected yield.
Points to remember
One risk to note would be a continued fall in the share price. This could offset any benefit from the future dividends. However, the other point to note is if the share price rallies. If the property market recovers over the next couple of years, Triple Point shares could jump. This would actually reduce the yield if an investor was late to the party.
So on balance, I feel investors should consider putting some cash in Triple Point shares in the coming months. It’s not a low-risk company, but the trough in the property market and the generous yield forecasts make it attractive.
