Two dividend stocks I own for juicy returns are Primary Health Properties (LSE: PHP) and Warehouse REIT (LSE: WHR).
Within the past couple of weeks, I received dividend payments from both. I’ve decided I’d love to snap up more shares when I can. However, it is worth remembering that dividends are never guaranteed.
Here’s why!
What they do
Both of these stocks are set up as real estate investment trusts (REITs). The draw of these types of stocks is that they must return 90% of profits to shareholders.
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They make money from property assets that they own, operate, and rent out.
In the case of Primary Health, the name gives away the game. It rents out healthcare facilities to providers such as the NHS for GP surgeries.
Warehouse also does what it says on the tin, as it specialises in warehousing and logistics facilities.
Primary’s investment case
Primary possesses excellent defensive traits, in my view. This is because healthcare is essential for everyone.
Furthermore, when you factor in that one of its biggest clients is the NHS, this helps the investment case. This is because the government is essentially paying the rent here. In turn, the likelihood of defaults is low, and multi-year agreements provide Primary with a sense of earnings stability.
Next, as the UK population continues to rise, and is ageing, I reckon demand for healthcare should remain robust.
Finally, a dividend yield of over 6% is very attractive. For context, the FTSE 100 average is closer to 3.6%.
From a bearish view, there’s been lots of coverage about professionals leaving the industry, or moving abroad in recent years. This is related to working conditions and pay disputes. One risk I’ll keep an eye on is Primary’s growth. It’s all well and good buying up new assets, but the NHS and other providers may lack the relevant workforce to staff them. This could hurt earnings and returns.
Warehouse’s investment case
The e-commerce boom has served Warehouse REIT well. It focuses on last-mile delivery hubs and rents these out to prominent retailers. I can see it continuing to capitalise on the current change in shopping habits.
However, from a bearish view, recent economic volatility is a worry, and I’ll keep an eye on developments. High inflation, as well as higher interest rates, have hurt commercial property values, and brought down net asset values (NAVs). Warehouse has had to sell some assets to shore up its balance sheet to cope with the current turbulence.
Moving back to the bull case, the first interest rate cut was confirmed this month. If this trend continues, economic pressures, as well as increased consumer spending and demand for Warehouse’s facilities could be good news. However, I do understand there’s no guarantee of further cuts or when they may occur.
Finally, a dividend yield of over 7% is enticing. Furthermore, the shares look good value for money on a price-to-earnings ratio of just over 10.
