Investment trusts that hold bricks and mortar assets could be top ones to consider this month given ongoing economic uncertainty. One potential safe haven I’m currently weighing up for my own portfolio to gain such exposure is The PRS REIT (LSE:PRSR).
Here’s why.
Safety play
As its name implies, this FTSE 250 stock’s categorised as a real estate investment trust (REIT). By specialising in supplying “high-quality, new-build family homes for the private rental market“, the trust operates in the most stable property sector out there.
Latest financials showed rent collection at 101% in the three months to March. Property occupancy meanwhile, was also impressive, at 96%.
PRS is supported by consistent demand for housing, which doesn’t fluctuate with the economic cycle. But this isn’t the only reason why earnings are stable from year to year. Its focus on the family home sector, where the gap between supply and demand is especially acute, gives the trust added strength.
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Rents boom
Let’s forget about the excellent defensive appeal of this residential property stock for a moment though. I think considering PRS shares could be a good move given the rapid pace at which private rents in the UK are growing.
Like-for-like rents on stabilised sites rose an impressive 10% year on year in the three months to March. The rate of growth has slowed more recently — rents were up 12% in the corresponding quarter in 2024 — but I’m expecting levels to remain well supported as tax and regulation changes worsen the housing crunch.
Data provider TwentyCi says that “the volume of all properties to let has hit yet another all-time low, with just 284,000 properties currently available across the whole of the UK“. An intensifying exodus of buy-to-let investors means property supply fell 18% year on year during the first quarter of 2025.
Dividend growth
Against this backdrop, City analysts expect PRS REIT’s earnings to rise 15% in the current financial year (to June). The trust’s tipped to follow this up with growth of 6% and 7% respectively.
Expectations of rising rental income lead brokers to expect consistent dividend growth over the period too.
With dividend cover below one, the business has kept annual payouts locked at 4p per share in recent years. But with earnings tipped to finally breach this level from this year, cash payouts are projected to grow once more:
| Financial year to March | Earnings per share | Dividend per share | Dividend cover |
|---|---|---|---|
| 2024 | 3.7p | 4p | 0.9 times |
| 2025 | 4.3p | 4.2p | 1 times |
| 2026 | 4.5p | 4.5p | 1 times |
| 2027 | 4.8p | 4.6p | 1 times |
As a consequence, a solid 3.6% dividend yield in fiscal 2025 rises to 3.9% and 4% for 2026 and 2027 respectively.
A top trust
Despite its defensive qualities, PRS REIT isn’t without risk. Net asset values and borrowing costs remain sensitive to broader interest rate movements. Therefore, any uptick in inflation could have damaging consequences for the company.
Changes to rental legislation could also pose a threat to future shareholder returns. But with no such hazard currently on the horizon, and inflationary pressures steadily easing, I think the trust’s a great one to consider this month.
