One way around this would be for me to load up on a few of the best real estate investment trusts. This would help to diversify my portfolio and may provide some protection against a correction or market crash. 

Reliable tenants

My first pick of the best real estate investment trusts to buy now is Primary Health Properties (LSE: PHP). This company owns purpose-built facilities which it leases out to GPs and government bodies. 

Unsurprisingly, rental income is about as predictable as it gets. Occupancy rates are also very high, at 99.6%. I can’t see this falling in the aftermath of the pandemic either. In fact, Covid-19 has served as a reminder of the importance of providing access to appropriate healthcare outside of hospitals.

Sure, PHP will never shoot the lights out. The share price has climbed a little under 50% since 2016. That’s clearly far less than I could have made elsewhere, highlighting arguably its biggest drawback.

Then again, massive gains aren’t the objective here. This is primarily a vehicle for protecting cash. It’s also a great income play. Right now, analysts have PHP yielding 3.7%. 

Hot property

Another option if I were looking for downside protection, at least in my view, is Tritax Eurobox (LSE: EBOX). If the name rings a bell, that’s because the much larger, UK-focused Tritax Big Box is currently knocking on the door of the FTSE 100. 

EBOX specialises in what might be regarded as ‘hot property’ at this point in time, namely warehouses. Thanks to the huge growth seen in e-commerce (and supported by the pandemic), retailers are crying out for more logistics space to hold their stock. This has helped send the share price more than 30% higher over the last year. 

Yes, an economic slowdown may put an end to this momentum as people tighten the purse strings. Even if this doesn’t happen, we could see more money being spent on experiences as opposed to possessions for a while.

However, I doubt this will hold back EBOX for long. And at around a £750m market cap, the company has a lot of space left to grow. The shares also yield 3.5%, as I type. 

Inflation-linked income

I think we can all agree that supermarkets are pretty defensive businesses. Since we all need to eat, it makes sense that cautious investors might want some exposure to this space.

If I didn’t want the hassle of picking a winner out from the pack, I could buy Supermarket Income REIT (LSE: SUPR). It aims to provide owners with inflation-linked income as well as capital appreciation over time. It does this by investing in omnichannel stores — large supermarkets that also operate as fulfilment centres for customers wanting home delivery and the option to click and collect. Its chief customers are the UK’s ‘big four’: market-leader Tesco, Sainsbury, Asda and Morrisons.

Will this approach deliver greater gains than investing in one of the companies mentioned above? Probably not. However, SUPR does boast a super forecast yield of 4.9%.

Like PHP and EBOX, I think this makes it one of the best real estate investment trusts to buy now. 

The post 3 of the best real estate investment trusts to buy now appeared first on The Motley Fool UK.

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• Here’s how a small dividend stock ISA could produce £1,400 in passive income a year
• £20,000 invested in an ISA a decade ago is now worth…
• Here’s how to invest £5,000 in an ISA for a 7.41% dividend yield
• How to invest £10,000 to aim for a £6,108 annual passive income

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Morrisons, Primary Health Properties, Tesco, and Tritax Big Box REIT. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Tritax Big Box

First up is warehouse provider and FTSE 250 member Tritax Big Box (LSE: BBOX). With a portfolio value approaching £4bn, tenants include top tier stalwarts Next and Unilever as well as US giant Amazon. 

Thanks to Covid-19 showing yet again just how convenient/essential online shopping has become, I find it hard to be anything but bullish on Tritax’s share price over the long term. A looming recession may force many to tighten their purse strings temporarily, but the e-tail boom clearly has a lot further to go. 

And dividends? Right now, this real estate investment trust yields a chunky 5.1%, based on analyst estimates of a 6.72p per share payout in 2020. For context, only five companies in the FTSE 100 are yielding more (and I suspect one of these — BP — will need to cut at some point).   

Big cash returns, solid growth prospects: What’s not to like?

Primary Health Properties

The second real estate investment trust I think should remain a good pick for income investors, particularly after the last couple of months, is Primary Health Properties (LSE: PHP). As you may have guessed, this company invests in the freehold or long leasehold of primary healthcare facilities.

PHP’s portfolio currently consists of 510 properties, the vast majority of which are GP surgeries. Other assets are let out to NHS organisations, dentists and pharmacies. Importantly, nearly all of the rental income is backed by the government. This should give investors far more confidence that payouts will be maintained compared to elsewhere in the market.  

Unsurprisingly, a stampede for relatively ‘safe’ income havens means that the shares currently trade on a hefty premium to their net asset value. Notwithstanding this, I think buying now can still be justified based on the non-cyclical nature of its business. The likelihood that demand for healthcare will only grow due to an ageing UK population is also a big draw.

PHP currently yields 3.8%, which puts it roughly on par with a stock like Tesco. Speaking of which…

Supermarket Income REIT

The days of panic-buying toilet paper are long gone. However, the coronavirus crisis has still succeeded in highlighting just how defensive investing in the UK’s supermarkets can be. My third and final pick from this area is, therefore, Supermarket Income REIT (LSE: SUPR). 

The £500m trust rents out property to FTSE 100 titans Sainsbury’s, Morrisons and the aforementioned market-leader, Tesco. Walmart-owned Asda is also a tenant. 

In SUPR’s view, the fact that supermarket property yields have climbed in recent years is a reason to get involved. The trust aims to buy property in highly-populated residential areas, with strong transport links. An average lease of more than 15 years is also sought. Combined, these should give investors a stable source of income that rises with inflation.

SUPR is likely to return 5.8p per share in this financial year (ending June 30). Based on the current share price, this gives holders of this real estate investment trust a forecast yield of 5.4%. 

The post Want dividends? I like these top real estate investment trusts appeared first on The Motley Fool UK.

More reading

• How to invest £20k in a Stocks and Shares ISA to target lucrative passive income for life
• Here’s how a small dividend stock ISA could produce £1,400 in passive income a year
• £20,000 invested in an ISA a decade ago is now worth…
• Here’s how to invest £5,000 in an ISA for a 7.41% dividend yield
• How to invest £10,000 to aim for a £6,108 annual passive income

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Primary Health Properties and Tritax Big Box REIT. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Dividend stocks

As such, income-starved investors are forced to become more creative, take bigger risks and move across different asset classes to search for higher yields. And one way for someone looking to boost their retirement income is to consider investing in dividend-paying stocks.

Although dividend payments are not guaranteed and can be lowered or eliminated at any time, dividend stocks can make a valuable addition to a retirement income. One of the best reasons why equities should form a meaningful proportion of every investor’s portfolio is the capital appreciation potential of stocks, which can help to grow your nest egg and support a comfortable retirement.

Inflation

What’s more, unlike the interest from unindexed bonds, stock dividends tend to grow over time. That dividend growth has also historically outpaced inflation, which helps investors to preserve their buying power over long periods, which is particularly advantageous if you’re relying on the income generated by your investments for living expenses.

Retirees should be cautious about chasing the highest-yielding stocks on the market, however, as focusing too hard on income may cost you dearly in the long run. If a yield is too high, relative to the earnings generated by a firm, it could be a sign that dividend payouts are not sustainable for very long.

Steady stream of income

Instead, retirees should focus on companies that operate in stable industries and offer their shareholders a steady and predictable stream of income.

One stock which comes to mind is commercial property company Supermarket Income REIT (LSE: SUPR). I’m guessing this isn’t a company that many of you have heard of before, but the REIT has caught my attention because it is attractively positioned in the current market environment and offers a stable, inflation-linked income.

Recovery

The company, which floated on the market just a year ago, has more than £300m invested across the UK supermarket property space, positioning it to benefit from the recovery in the UK grocery market. This is because the covenant strength of supermarket operators as tenants is improving as the underlying profitability of the big four UK supermarket operators rebounds from the depths of recent lows.

Yet after a difficult past few years, caused by the rise of the discounters and the shift towards online shopping, the fall in supermarket property prices has pushed yields to attractive levels, just at a time when the sector is beginning to turn around.

Highly attractive leases

But even though yields for supermarket property are higher than the market average, Supermarket Income REIT’s property portfolio is more defensive than many of its peers due to its highly attractive leases and strong tenant covenants.

Of course, the recovery in the supermarket sector is far from assured, and there’s no guarantee that property prices may not have further to fall. But all six of its investment properties are leased to either Tesco, Sainsbury’s or Morrisons — big household names that are of strong financial standing. In addition, each and every lease benefits from upwards only RPI-linked rent reviews and a long unexpired lease term, affording investors good protection against inflation and certainty over future dividends.

Highly experienced

I also like the fact that the REIT has in place a highly experienced management team and investment advisors that have previously structured and executed more than £4bn worth of supermarket sale and leaseback transactions.

Amid a dynamic retail marketplace, the company’s strategy is focused on investing primarily in future-proof supermarkets — that is, stores operating both as a physical supermarket and as an online fulfilment centre. It’s also keen to find properties with asset management potential — those located in populated residential areas, with strong transport links, which may also be suited for alternative use over the longer term, such as housing and leisure.

Shares in Supermarket Income REIT trade at a slight premium to net asset value, while offering a current dividend yield of 5.3%.

Strategic review

Elsewhere, I reckon WPP (LSE: WPP) is another dividend stock worth considering for investors seeking a reliable and growing income.

The company, which is the world’s largest ad agency, is undergoing an important strategic review after a period of duress, caused by a slump in ad spending by major consumer brands and rising competition from tech rivals. This opens up the possibility of asset disposals, as it looks to simplify its sprawling operations, reduce leverage and restore growth to the company.

As such, it is currently exploring a sale of a minority stake in its Chinese unit to local tech giants Alibaba and Tencent. A spin-off of its China unit, which is estimated to be worth as much as $2.5bn, could help to realise its value through a separate market valuation. At present, City analysts reckon WPP trades at a substantial discount to the sum of its parts, due to the sprawling and complicated business, which touches everything from advertising to market research and public relations.

Digital disruption

A partnership with Alibaba and Tencent could also improve WPP’s effectiveness at growing its business in China as digital disruption shakes up the industry. Such a move would underline WPP’s strategy of localising its operations in the country, which could help it to better adapt to the changing industry environment.

Certainly, it will take time for WPP to build up its digital capability and near-term headwinds will continue to put pressure on earnings over the next few years. Although recent revenues have been buoyed by past acquisitions and a weak pound, going forward in the current financial year, City analysts expect revenues to dip by 3%.

Dividends

Still, the company’s progressive dividend policy will likely remain intact. That’s because, in spite of the near-term headwinds, its dividend cover is still very high — at 2 times last year. Net debt, which increased by £352m to £4.48bn last year, will probably not cause any problems either, as it remains within the company’s target leverage of 1.5 times to 2 times average net debt-to-EBITDA.

WPP has a current dividend yield of 5.1%, with the shares trading at 10.9 times expected earnings this year.

The post These 5% dividend yielders could turbocharge your retirement income appeared first on The Motley Fool UK.

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• Here’s how to invest £5,000 in an ISA for a 7.41% dividend yield
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• How much would someone need to invest in the stock market to target a £1,250 monthly second income?

Jack Tang has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With that in mind, here are two investment trusts which appear to offer strong income prospects. At the present time they yield over 4% apiece, with dividend growth having the potential to beat inflation.

Improving outlook

Reporting on Monday was real estate investment trust (REIT) Supermarket Income REIT (LSE: SUPR). The company invests in supermarket assets in the UK, with its trading update for the quarter to 31 March generally upbeat.

During the period it was able to conclude two rent reviews with 3.9% increases. Since acquisition, its investment properties have recorded a rise in valuation of 4.5%. Since its assets have weighted average unexpired lease terms of 18 years, with no break options, they appear to offer a relatively low-risk income opportunity. Rent reviews are upward only and are linked to RPI, while a net asset value of 96p per share suggests that the stock may be undervalued at its current share price of 101p.

With a dividend yield of 5.4% and forecast earnings growth of 14% in the next financial year, Supermarket Income REIT appears to offer a solid income investing outlook. While not the most exciting of companies, for investors who are seeking relatively solid income returns it could prove to be an enticing dividend option for the long term.

Solid performance

Also offering income appeal within the REIT sector is Big Yellow Group (LSE: BYG). The storage specialist has reported a relatively consistent financial performance in the last five years, with its bottom line rising in four of the five years. This suggests that it offers a lower-risk outlook than many of its index peers, with its 8% forecast earnings growth rate over the next two years having a high chance of being met.

With Big Yellow Group having a dividend yield of around 4%, it’s likely to continue offering income over the foreseeable future. Certainly, its price-to-earnings (P/E) ratio of 25 suggests that it may struggle to deliver an upward re-rating. However, if market volatility continues then it may be able to easily justify its P/E ratio since it could offer a resilient financial performance in future.

With Big Yellow Group seeming to have a solid strategy which has been able to deliver growth over a sustained period, its risk/reward ratio seems to be attractive. At a time when investor sentiment is difficult to gauge, it could be a worthwhile stock to buy and hold for the long run.

The post 2 investment trust dividend stocks yielding 4%+ that I’d buy with £2,000 today appeared first on The Motley Fool UK.

More reading

• Here’s how a small dividend stock ISA could produce £1,400 in passive income a year
• Here’s how to invest £5,000 in an ISA for a 7.41% dividend yield
• No savings? Here’s how to target a £1,500 monthly second income
• How much would someone need to invest in the stock market to target a £1,250 monthly second income?

Peter Stephens owns shares of Big Yellow Group. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Blue-chip tenants

The company is building a portfolio of properties let to UK supermarket operators, aiming to derive at least 60% of its rental income from the biggest four, namely, Tesco, Sainsbury’s, Asda and Morrisons. It’s targetting principally freehold and long leasehold properties with index-linked or fixed rental uplifts and with typically more than 15 years to first break. The objective is to provide shareholders with a progressive dividend offering considerable inflation protection.

The company also has an eye on long-term capital growth, including by targetting assets in areas with good potential for alternative use over the longer term, such as residential housing. I also like the fact that the board will be taking a prudent approach to gearing, by maintaining conservative level borrowings.

Set for wider attention

The company has already invested over £150m on three acquisitions and secured a £100m revolving credit facility on attractive terms from HSBC. It announced a first interim dividend of 1.375p a share last week (the ex-dividend date is tomorrow). And in a maiden trading update today, it reaffirmed it’s on track to deliver an annualised 5.5p dividend for the full year to 30 June 2018.

As the shares are currently little changed from the 100p IPO price, there’s a nice yield on offer. And with management targetting a total return of 7% to 10% a year over the medium-term, this is an under-the-radar dividend stock that could soon be attracting wider attention.

A precedent

Investors in Supermarket Income REIT would be delighted if the stock were to follow in the footsteps of Watkin Jones (LSE: WJG), which floated at 100p a share in March last year. This well-established specialist in the development, construction and management of student accommodation also came to market with an attractive dividend in prospect.

It didn’t remain entirely under the radar for long. Within six months, its shares began to rise and the price has reached 220p today. Shrewd investors appreciated the company’s forward-sale business model and end-to-end service, which reduce risk and provide good cash flow visibility. Management has also increasingly demonstrated its capabilities and its good execution on its strategy.

Due to the more-than-doubling of the share price since flotation, the dividend yield has compressed to 3%. I like the company but it looks fully valued to me now. As such, Supermarket Income REIT appears a potentially better-value opportunity at this stage, although I wouldn’t expect it to repeat the magnitude of Watkin Jones’s share price rise over a similarly short period.

The post 2 under-the-radar dividend stocks I’d consider in October appeared first on The Motley Fool UK.

More reading

• Here’s how a small dividend stock ISA could produce £1,400 in passive income a year
• Here’s how to invest £5,000 in an ISA for a 7.41% dividend yield
• No savings? Here’s how to target a £1,500 monthly second income
• How much would someone need to invest in the stock market to target a £1,250 monthly second income?

G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.