Take the following three dividend stocks. Each trades on a forward price-to-earnings (P/E) ratio of below 10 times. They also carry an enormous dividend yield above 5%. Here’s why I think they deserve serious consideration today.

Investec

Shares with low P/Es and sky-high yields are often signs of companies that are experiencing dividend problems (or are tipped to). This isn’t the case with investment bank Investec (LSE:INVP), which has a P/E of just 6.9 and carries a 7% dividend yield.

Like many UK stocks, Investec’s shareholder payouts dropped during the Covid-19 pandemic. Excluding this turbulent period, they’ve risen every year since 2010. Analyst predictions of another rise this financial year (to March 2027) look in good shape, with the expected dividend covered 2.1 times by anticipated earnings.

Investec’s share price might be blown off course if tough economic conditions hit profits. But that strong cover should at least mean dividends meet expectations.

Over the long term, I expect both earnings and dividends to rise strongly as the financial services market booms. Investec’s strong brand power puts it in an especially strong position to seize this opportunity.

Mears

Mears (LSE:MER) provides maintenance and repair services for thousands of homes across the UK. It straddles both public and private sectors, though it typically operates under long-term contracts with housing associations and local authorities.

Today it trades on a forward P/E ratio of eight, and its dividend yield is 5%. This year’s dividend is covered a healthy 2.5 by anticipated earnings. So what are the risks?

With a strong reliance on government contracts, profits are greatly influenced by policy changes that impact budgets. But on balance, I think its still a rock-solid stock to consider — after all, demand for quality residential property remains stable at all points of the economic cycle.

Looking longer term, I think it could deliver brilliant all-round returns as Britain’s booming population drives housing demand.

Custodian Property Income REIT

As its name implies, Custodian Property Income REIT (LSE:CREI) is designed to deliver passive income to shareholders. In this respect it isn’t alone — all real estate investment trusts (REITs) must pay at least 90% of rental profits out in dividends.

So what makes this particular one so special? Firstly, its 7.1% dividend yield for this financial year (to March 2027) is one of the sector’s highest. And its forward P/E ratio is a snip at 9.9.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

With interest rates falling and the UK in low-growth mode, Custodian could experience occupancy and rent collection issues going forward. But I’m confident it can sidestep such problems given its wide operational wingspan.

In total, it has 430 tenants across a variety of industries, meaning it enjoys stable income streams over time. And it has customers tied down on long contracts which further improves earnings visibility.

The post Seeking stock market bargains? 3 dividend stocks with 5%+ yields to consider appeared first on The Motley Fool UK.

I’ve recently discovered an under-the-radar REIT that looks like a rare opportunity. While most investors obsess over FTSE 100 mega-caps, this small but promising stock is sitting in the bargain bin — and 2026 could be its breakout year.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Custodian Property Income

With an enterprise value of £557m, Custodian Property Income REIT (LSE:CREI) is a trust that invests in smaller, regional UK commercial properties. It’s unglamorous, it’s unfamiliar, and, right now, it looks attractively undervalued.

Trading at an 11% discount to its underlying asset value (NAV), investors essentially get shares worth almost 100p for just 86p each. That’s like buying a £100 coat for £86 simply because the shop is not very well known. REITs across the sector average a 13%-21% discount, so its gap to true value is already narrow – and closing.

But the real attraction is the juicy 7% yield — nearly double the FTSE 100 average. And with a payout ratio of only 52.8%, it’s well-covered by actual earnings. In other words, the company generates more than enough profit to pay every penny of that dividend.

And it’s been doing so consistently for 11 years.

The catalysts that look promising in 2026

The Bank of England has already cut rates twice and is expected to cut them at least three more times in 2026. Lower interest rates mean lower borrowing costs, so more money left over for dividends. Custodian Income has 85% of its debt on fixed rates averaging 3.4%, giving it serious protection if rates stabilise. That’s fortress-level stability.

On top of that, its portfolio has £51.9m in estimated rental value against £45.9m in actual rent being collected. That 13% gap represents a potential future earnings growth through lease renewals, rent reviews, and lettings of vacant space. Essentially, the company is perfectly positioned to capitalise on an improving housing market.

When interest rates fall and property market sentiment improves (as expected in 2026), REIT share prices historically converge toward NAV. Should the stock’s 11% discount compress to 5%-7%, it could deliver instant 5%-7% capital gains on top of the 7.4% yield.

Meanwhile, management isn’t sitting idle. Interim results show earnings per share up 3.3%, driven by leasing activity, refurbishments, and strategic disposals. The team is actively upgrading its assets, installing solar panels, refurbishing warehouses, and renoegotiating rents. For instance, its Tamworth warehouse saw annual rent jump from £359k to £1.3m after a 2024 refurbishment.

The one area where it faces risk is office space. Remote working means office space valuations are falling, which could impact Custodial’s earnings. The division is smaller than its industrial and retail assets but still, it must manage it carefully to avoid losses.

Why REITs can beat buying property

For £50 a week, you can’t buy a commercial property. But it’s worth considering a REIT like Custodial Income, where you can own a slice of over 140 diversified regional properties across the UK.

From offices in Leeds and Manchester to warehouses in Tamworth, shareholders gain exposure to high-income retail units scattered nationwide.

That’s professional-grade diversification — and it comes with a meaty 7% yield paid quarterly on each share owned.

The post This under-the-radar REIT could deliver stellar income for UK investors in 2026 appeared first on The Motley Fool UK.

Property around the UK

I’m referring to the Custodian Property Income REIT (LSE:CREI). Over the past year, the share price is flat, with the dividend yield currently at 7.4%. It generates rental income from a diversified portfolio of assets. It typically invests in a variety of smaller, regional UK commercial properties like offices and industrial units.

The properties are let to a wide variety of tenants. Unlike some other REITs that just deal with a few large end users, in this case, there’s no single tenant or property that accounts for a large share of the total rent roll. I like this because it reduces concentration and tenant-default risk.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Let’s talk about dividends

Back in June, the latest financials showed the current dividend per share was fully covered by earnings. This is a good sign, because if it wasn’t covered, then I’d be worried about the sustainability. Yet if the company keeps paying out dividends (that have increased over the past few years) in line with earnings, it bodes well for the long term.

The diversified mix of properties and tenants means cash flow is less dependent on any single lease or sector. This reduces the risk of a large income disruption. Further, the company has fairly conservative levels of debt financing. So even if interest rates stay higher for longer next year, there’s limited risk related to any debt refinancing. In turn, this supports stable cash flow to fund dividends.

Potentially undervalued

With a REIT, the share price should trade closely to the net asset value (NAV) of the property portfolio. However, this isn’t always the case. Right now, the stock trades at an 18% discount to the last recorded NAV figure from late June. Of course, we’ll have to wait for a more up-to-date figure before jumping to conclusions. That’s why I refer to it as potentially being undervalued to that extent. Yet if this figure is still accurate, I’d expect the share price to rise over time. As a result, the discount would be smaller.

In terms of risks, we could see an economic slowdown in the UK next year due to recent tax changes. In this case, it could negatively impact the REIT. Income growth could stall if the ability to re-let vacant space or increase rents via rent reviews weakens due to the weaker economy.

Even with this concern, I think it’s a good stock for investors to consider for both income and potential share price growth.

The post This REIT could be 18% undervalued with a 7.4% dividend yield appeared first on The Motley Fool UK.

Here are three shares for income investors to consider today. Across them, the average dividend yield is an enormous 8.4%.

High yielding housebuilder

Things remain uncomfortable for Taylor Wimpey (LSE:TW.) as the housing sector endures a bumpy recovery. On Wednesday (30 July), the company reported “softer market conditions” in Q2, with average selling prices of £313,000 in H1 coming in lower than its forecast of £330,000.

Trading could continue disappointing if the UK’s economy keeps struggling, putting further pressure on the company’s share price. But thanks to its industry-leading balance sheet, I’m optimistic Taylor Wimpey should at least continue paying large dividends.

Its forward yield is now 9.3%. Dividend forecasts are supported by the Footsie housebuilder’s impressive £326.6m net cash pile.

Over the longer term, I think Taylor Wimpey’s profits will rise strongly as Britain’s population booms and demand for new homes follows suit. This should make it an attractive dividend share for years to come. The UK population is tipped to reach 70m by the middle of 2026 by the Office for National Statistics, around a decade earlier than previously thought.

Dividend specialist

Real estate investment trust Custodian Property Income REIT (LSE:CREI) is designed with dividends in mind. It pays out 90% of annual earnings or more from its rental operations to shareholders, in line with industry regulations.

This doesn’t automatically translate into huge passive income flows, mind. Profits can disappoint during economic downturns if rent collection and property occupancy levels dip.

Custodian’s exposure to cyclical sectors like retail and industrials make this a possibility. But the risk is low, in my opinion: the trust has almost 180 properties on its books and around twice the number of tenancies, providing excellent diversification. Tenants are also secured on long contracts: the weighted average unexpired lease term was five years as of June

The forward dividend yield here is 7.4%.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Excellent cash flow

Legal & General (LSE:LGEN) is the second FTSE 100 share on this list. It’s also, like Taylor Wimpey, a UK stock I’ve bought to boost my own dividend income.

The markets it specialises in — namely asset management, and retirement and life insurance products — are growing rapidly over time. But companies in this sector have struggled to grow profits more recently due to higher interest rates and weak economic growth.

These issues remain dangers in the near term. But so far, this hasn’t compromised Legal & General’s excellent cash generation and its ability to pay enormous and growing dividends — its astonishing Solvency II capital ratio of 232% suggests things aren’t about to change in the near term either.

City analysts agree. And as a consequence, Legal & General shares carry a gigantic 8.6% dividend yield.

The post 8.4% average dividend yield! Consider these 3 UK shares for a huge passive income appeared first on The Motley Fool UK.

Take the following dividend shares, for instance:

You’ll see that the yield on these shares smashes the average for FTSE 250 shares. You’ll also notice that each three of these stocks is tipped to raise their annual dividend this year.

This is important to me as a long-term investor. I’m not only searching for big dividend yields today. I want companies that consistently grow their dividends year after year.

A growing dividend mitigates the impact of inflation, while also giving me a rising passive income stream. When reinvested, this income can help me compound wealth over time.

Pick #1

Property investment trusts like Custodian Property Income can be a great source of dividend income from year to year.

Real estate investment trusts (REITs) are designed to provide a decent cash stream for investors. In return for tax advantages, they pay a minimum of 90% of annual rental earnings to their shareholders.

This doesn’t guarantee a dividend, of course. Custodian’s exposure to cyclical sectors like retail, offices, and leisure means rent collections and/or occupancy may disappoint during downturns, hitting payouts in the process.

However, the firm’s large list of tenants helps to reduce this risk. It has 338 tenancies, and these have a weighted average unexpired lease term (WAULT) of just under five years, providing solid visibility.

At 77p, the company’s share price is trading at 21% below its estimated net asset value (NAV) per share of 97.5p. I think Custodian’s a top stock for consider for investors seeking a low-cost passive income.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Pick #2

Commercial broadcasters like ITV face the ongoing threat of weak advertising sales in 2025. Poor economic conditions in the UK could see companies keep the taps turned down on their marketing activities.

Yet I figure this is baked into the company’s low price-to-earnings (P/E) ratio of 7.9 times. Combined with that huge dividend yield, I think it’s worth serious consideration.

As a long-term investor, I’m excited about ITV shares for two main reasons. With strike action in the US over, the outlook for its ITV Studios production arm is much improved. It can expect revenues here to rise steadily as broadcasters and streaming companies like Netflix seek to acquire new content.

I’m also impressed by the ongoing progress of its own ITVX streaming service. Total viewing hours here leapt 14% between January and December despite intense competition from other streaming services. I expect this strong growth to continue as ITV invests heavily in technology and programming.

With a net-debt-to-adjusted EBITDA ratio of below one, ITV has scope to continue investing for growth while also paying large dividends. I think it’s a top passive income share to look at.

The post Fancy supercharging your passive income? Here are 2 cheap FTSE 250 shares to consider! appeared first on The Motley Fool UK.

With this in mind, here are two companies I think deserve a close look, despite the possibility of some near-term trading turbulence.

Springfield Properties

Data from the housing market remains highly encouraging for builders such as Springfield Properties (LSE:SPR). Latest house price data from Nationwide showed average property values rise at their fastest for two years in November.

This doesn’t mean construction firms are out of the woods just yet. Sales at Springfield — which dropped 19.8% during the financial year to May — may continue to struggle next year. That is, if sticky inflation keeps interest rates around current levels.

However, it’s my belief that this threat may be baked into the firm’s low valuation. At 87p per share, it trades on a forward price-to-earnings (P/E) ratio of 10.9 times. This makes it one of the cheapest housebuilders on the London Stock Exchange.

Meanwhile, Springfield shares also trade on a price-to-earnings growth (PEG) ratio of just 0.8 for fiscal 2025. Any reading below 1 implies a stock’s undervalued.

I believe the robust long-term market outlook makes the builder worth serious consideration. Estate agent Knight Frank believes average home prices will rise a cumulative 19.3% during the five years to 2029. That’s because buyer demand will likely continue to outpace supply.

Analysts at Edison note that “the UK population has risen every year since 1978 and is expected to rise every year for the next 30 years“. Springfield shares could be worth considering as a lucrative way to capitalise on this trend.

Custodian Property Income REIT

Property stock Custodian Property Income REIT (LSE:CREI) is also vulnerable to higher interest rates persisting in 2025.

In this case, unfavourable Bank of England policy could depress its net asset values (NAVs) while keeping borrowing costs above recent norms. Yet like Springfield Properties, I think this threat may be baked into the real estate investment trust’s (REIT) low share price.

At 78.5p per share, Custodian trades at a 18.6% discount to its estimates NAV per share of 96.4p.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

There are other reasons why, as a value investor, I’m a big fan of the trust today. At 7.8% for this financial year (to May 2025), its dividend yield is more than double the 3.6% average for FTSE 100 shares, for instance.

This in large part reflects Custodian’s classification as a REIT. In exchange for tax perks, these UK stocks must distribute a minimum of 90% of their annual profits from their rental operations by way of dividends.

I like this UK share because of its broad diversification which helps to reduce risk. The 152 properties on its books are spread across multiple sectors including office, retail and industrial. Furthermore, it enjoys reliable rental income, thanks to its tenants being tied down on multi-year contracts.

These qualities allow Custodian to provide healthy dividends across the economic cycle. I think it’s worth serious consideration today.

The post Forget short-term pain! 2 dirt cheap UK stocks to consider for long-term gain appeared first on The Motley Fool UK.

Passive income opportunity

As a reminder, a real estate investment trust (REIT) is a business that owns and operates income-generating real estate. These companies, including Custodian, can possess many different types of properties such as residential, commercial, and industrial to yield rental income. The beauty of REITs for me is that 90% of income must be paid to shareholders.

So let’s take a look at Custodian then. Its assets are quite diversified when it comes to property type and geography. Some of the types of property it holds across the country include industrial, retail warehouses, office blocks and high street. This diversification is an appealing factor to me because it can protect me from a downturn in one industry. Any shortfall in, say, the commercial property market could be offset by a burgeoning residential market, for example.

What level of return am I looking at if I purchased Custodian shares? At present, its dividend yield stands just short of 6%. This is higher than the FTSE 100 average of between 3%-4%. This is an attractive level of return to a passive income seeker such as myself.

The next reason Custodian shares caught my attention recently is I believe shares are trading cheaply. At present, they are trading for 93p on a price-to-earnings ratio of just 6. At this point in time last year, the shares were trading for 6% higher at 99p. I am not worried about this small drop off in share price. In fact, I view it as an opportunity to pick up shares cheaper than I may have in the past.

Risks and what I’m doing now

A major part of my investing strategy is to consider any risks involved when purchasing a stock as well as the bullish aspects.

When it comes to Custodian, although the passive income opportunity is appealing, I must remember that dividends are never guaranteed. They are paid at the discretion of the business and any downturn in performance could result in them being scrapped to help conserve cash.

Next, I believe that economic volatility is a major risk involved when considering property stocks. During tough economic times or a recession, demand for property as well as rental income could be negatively affected. In turn, this could impact performance and shareholder returns. I also believe the current economic issues such as soaring inflation have pulled Custodian’s share price back in the past six months as highlighted by the chart above.

Upon reviewing the positives and negatives of Custodian shares, I have decided I would be willing to add Custodian shares to my portfolio. I believe they represent a good passive income opportunity for my holdings and could boost my wealth in the long term.

The post Here’s how this property stock could boost my passive income stream appeared first on The Motley Fool UK.

Diverse REIT

As a quick introduction, Custodian is a REIT that focuses on multiple sectors of property across many towns and cities across the UK. These include industrial, commercial, office, and retail properties. The properties it owns and rents out help make it that rental income that is then paid to investors such as myself.

So what’s happening with Custodian shares currently? Well, as I write, they’re trading for 105p. At this time last year, the stock was trading for 94p, which is an 11% increase over a 12-month period.

Risks to note

I believe the biggest threat to any REIT currently is economic volatility and any recession that could occur. This is because when the economy is volatile, rental income, as well as demand for property, could be negatively affected. If this were to happen, Custodian’s performance and returns could be affected.

Next, as with any passive income stock, I must remember that dividends are never guaranteed. They can be cancelled at the discretion of the business at any time. Dividends are usually cut to conserve cash and some of the causes can include financial difficulty, a recession, or a one-off event like a pandemic.

Why I like Custodian shares

So let’s take a look at the bull case then. Firstly, I like that Custodian’s property portfolio is diversified from a sector and geographical perspective. It has different types of income-yielding property in various locations throughout the country. I believe this will support performance and growth — if one location or sector slows, growth in another could offset it.

Next, Custodian shares offer a dividend yield of 6.3% at current levels. This is higher than the FTSE 100 and FTSE 250 averages of 3%-4% and 1.9%, respectively. Furthermore, the shares look decent value for money currently on a price-to-earnings ratio of just four.

Finally, although I understand past performance is not a guarantee of the future, I am buoyed by Custodian’s track record. Looking back, I can see it has recorded consistent revenue for the past four years and profit for the past three years. This level of sustained performance should support consistent returns.

In conclusion, I would add Custodian REIT shares to my holdings currently. I believe they would fit into my portfolio nicely along with the other REITs I own shares in. The dividend yield on offer, cheap share price, and the diverse nature of its operations help build my investment case.

The post Here’s 1 diverse REIT that could boost my passive income! appeared first on The Motley Fool UK.

The UK market offers a choice of REITs, including healthcare, industrial, office and retail specialists. Here, I want to highlight three REITs with yields over 5% that I think are among the best buys today.

A top FTSE 100 REIT

A REIT is a legal structure that’s taxed differently from a company. In short, REITs get certain tax breaks so long as they return 90% of their rental profits to shareholders in the form of dividends.

One of the largest UK REITs is FTSE 100 member Landsec (LSE: LAND). This £5.6bn firm owns some of London’s most valuable office blocks, as well as a portfolio of major shopping centres, retail parks, hotels and leisure sites.

Of course, we still don’t know for sure whether office and retail demand will return to pre-pandemic levels. That’s a risk here. But, in my view, the quality and location of Landsec’s assets means they’re likely to remain popular.

On balance, I’m attracted to Landsec’s property portfolio and its forecast dividend yield of 5.1%.

A healthcare opportunity?

One sector of the market that shouldn’t be affected by working from home or internet shopping is healthcare. My choice in this area is Target Healthcare REIT (LSE: THRL), a £700m firm which owns a portfolio of long-lease UK care homes.

At the end of December, Target’s averaged unexpired lease length was 27.5 years. This should guarantee predictable rental income for many years. With Target shares offering a 6% dividend yield, this portfolio looks attractive to me.

However, it’s worth remembering that a long lease doesn’t provide any protection against tenants who suffer financial problems. Too many bankruptcies could put pressure on care home rental rates. I don’t know how likely this is, but I do believe it’s a risk.

Fortunately, the UK’s ageing population means demand for care home beds is likely to remain strong. Target estimates that the number of over 85s in the UK will double by 2040.

By focusing on purpose-built homes with wet rooms and good facilities, Target hopes to operate at the quality end of the market, attracting financially secure tenants. I think this REIT is likely to be a long-term winner in this sector.

A regional UK REIT

My final choice is Custodian REIT (LSE: CREI). This REIT is a little different from my other two picks because it owns a mixed portfolio of property in towns and cities all over the UK.

Custodian’s portfolio includes offices, shops, industrial units and warehouses. For me, this is a UK REIT that provides direct exposure to the real UK economy. The obvious risk here is that I’d expect some of Custodian’s tenants to suffer in a recession, perhaps more than at Landsec.

I’m comfortable accepting this risk, partly because Custodian REIT has a loan-to-value ratio of less than 20% — lower than average. I think this would provide some breathing room in a difficult market.

In the meantime, I think Custodian REIT’s 5.5% dividend yield looks very attractive. I’d buy this UK REIT for my portfolio at current levels.

The post 3 high-yielding UK REITs to buy in May appeared first on The Motley Fool UK.

Real estate got hammered by the pandemic. But with the world finally opening up again, I think there’s cash to be made investing here.

UK REIT number one

AEW UK REIT (LSE:AEWU) invests in freehold and leasehold commercial properties across the UK. They include offices, high street retail properties, and industrial warehouses.

Now, you might be thinking that offices and retail are a dying breed. Not quite, in my estimation. While brick and mortar retail has lost market share to online, people still want physical stores. And while offices aren’t the draw they used to be with more working from home, not every company is going fully remote just yet.  

“I expect we will see three or four days a week in the office as the UK recovers,” says Paul Swinney, director of research at the Centre for Cities thinktank.

There is one downside to note for this UK REIT. Full-year 2021 earnings are expected to fall to £16m, before climbing back up to £16.8m in 2022. So the share price could take a hit in the near term.

But the dividend yield AEW plans to pay over those two years will jump from 6.93% in 2020 up to a whopping 8.53%. That’s some serious cash returned to shareholders. Of course, dividends are never guaranteed. Earnings per share are expected to lift from 2.4p per share in 2020 to 6.19p in 2021, and 7.31p in 2022.

A forward price-t0-earnings ratio of 12.5 makes AEW UK REIT cheap, for me. And we heard on 15 June 2021 it won a court battle to recover £1.2m in unpaid rent. I’d buy it now for the dividends alone.

Custody battle

The second UK REIT I’d buy today for big income is Custodian REIT (LSE: CREI). Again, the figures stack up nicely for some serious future dividend yield.

A forward P/E of 15 is about average. However, I’m looking at this UK REIT for its expected 180% earnings per share growth next year. It also has a conservative net gearing at 32%, so I know it’s not overly indebted.

Today’s yield is decent enough at 3.66%. But 2022 dividends are slated to come in at 5.69%, climbing to over 6% the following year. Net profit is forecast to recover strongly from just over £2m in FY2021 to £28m in FY2022. The numbers also show that investment giant Blackrock increased its holding in May 2021.

There’s risk here, of course. Operating margins have been thinned out in recent years. And there’s obvious risk that Custodian REIT might not meet its ambitious targets for profit growth. That would hurt my investment badly.

However, I think this UK REIT is a bargain now based on what’s to come. And I do like laying down cash today, and waiting for every other investor to reach the same decision. I get my dividends, and I may get capital gains from share price appreciation, too.

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