I don’t have to actually buy stocks before the 5 April deadline. Just putting money inside this tax wrapper to use at a later date is enough to make use of my £20,000 allowance.

But I don’t feel the need to wait. There are many top London Stock Exchange-listed REITs that look too cheap to miss following recent stock market volatility.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

2 REITs on my radar

I think REITs in particular are a great way for me to make an extra passive income. In exchange for certain tax advantages, these companies have to pay at least 90% of annual profits from their rental operations by way of dividends.

With this in mind here are two top REITs I’m considering buying today.

The PRS REIT

Paying the rent or the mortgage is one of the few things people must keep paying for even during downturns. This makes The PRS REIT (LSE:PRSR) a dependable dividend payer at all points of the economic cycle.

In fact the outlook for this particular share is improving even as the British economy struggles. That’s because of a growing supply and demand imbalance that’s pushing residential rents rapidly higher.

The number of available residential rental properties has slumped by a third in just 18 months, Zoopla recently told the BBC. This in turn pushed rents for new tenants up by a hefty 11%.

Rents look set to keep climbing as well, as housebuilding activity fails to keep pace with population growth.

The PRS REIT is already capitalising effectively on these favourable market conditions. Net rental income and adjusted earnings rose 20% and 31% respectively in the six months to December.

This UK share carries a meaty 5.2% dividend yield today. I’d buy it even though any changes to rental regulations could hit profits later down the line.

Ediston Property Investment Company

Investing in retail-related shares like Ediston Property Investment Company (LSE:EPIC) carries higher risk than normal. This retail park owner might struggle to collect rents as consumer spending power sinks.

According to Kantar Worldpanel, grocery price inflation hit record highs of 17.5% in the four weeks to 19 March. This equates to £837 less in householders’ pockets each year which, in turn, is smacking shopper demand for non-essential items.

Yet despite this I’m still considering buying Ediston shares for my portfolio. I’m expecting profits here to surge over the next decade as retailers prioritise expansion into retail parks. The rise of click-and-collect, allied with a wider choice of goods and ease of access by car, mean this UK property segment should continue growing rapidly.

I’m also attracted to Ediston due to its huge 7.8% forward dividend yield. In fact I think the business could be a great buy for market-beating, long-term passive income.

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They enable investors to pool money in order to buy properties that would be unattainable on smaller budgets. These investment vehicles also give individuals a chance to invest in sectors that might also be out of reach, like hospitals, retail parks, and office blocks.

Pleasingly REITs receive certain tax advantages by being registered as such. And this can have a big advantage for dividend investors. Under sector rules, these property shares must pay a minimum of 90% of annual profits out by way of dividends.

2 top REITs for investors

This perk prompted me to buy Primary Health Properties and Target Healthcare REIT for my Stocks and Shares ISA. And I’m considering adding to my REIT holdings to boost my passive income even further.

Here are two of these top income stocks for savvy investors:

#1: Assura

Primary Health Properties’ latest financials last week underlined why medical property specialists like Assura (LSE:AGR) are such attractive stocks right now. Even as the UK economy splutters, rental income can still be expected to grow.

Net rental income at Primary Healthcare Properties rose 3.5% in 2022, a result that pushed adjusted earnings 6.6% higher. This allowed the business to raise the annual dividend to 6.6p per share from 6.2p, the 27th straight annual rise.

Healthcare is one of the most recession-resistant sectors out there. Demand for medical services remains robust at all points of the economic cycle. And businesses like Assura carry an extra layer of security as their rents are mostly guaranteed by government bodies.

REITs like this have terrific growth potential, too, driven by demographic changes in the UK. As the elderly population grows, demand for primary healthcare facilities like doctor surgeries and diagnostic centres will also shoot higher.

Changes to NHS policy could hit earnings. But on balance I’m expecting big things from shares like this.

For this financial year to March 2023, Assura carries a 6% dividend yield. The figure marches to 6.3% for the following fiscal year, too. I think this is a great share for passive income now and in the future.

#2: Ediston Property Investment Company

Tough conditions for British consumers put retail property owners in some immediate danger. This includes Ediston Property Investment Company (LSE:EPIC), a retail park operator that might see demand for its shopping warehouses falter.

But I believe the REIT is still a great buy for long-term investors. Changing consumer expectations mean that retailer interest in shopping warehouses is growing.

The modern shopper enjoys larger stores that are easy to reach and offer free parking. They also serve an important role for online consumers with the steady rollout of click-and-collect services. Finally, retail parks offer a greater variety of shops than before and this is attracting people away from the high street.

A supply crunch hasn’t yet transpired in the retail park sector. But the chances of one developing are high, and this could give rental income at businesses like Ediston a big boost.

The business carries a mighty 7.9% dividend yield for the financial year to September 2023. I expect it to keep delivering market-beating yields for a long time, too.

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Retail warehouses are spacious and they offer consumers a wide variety of goods in one place. They are also easily accessible by car and therefore ideal destinations to exploit the Click and Collect boom.

Shopping parks are seen as a more attractive place for people to shop and hang out. And so the number of food and beverage companies setting up shop is also setting up shop here is rocketing, providing further handy boost to rents.

According to Savills there were 794 new store openings in out-of-town retail parks between January and September. And a whopping 31% of these were food and beverage operators. The table below shows how rapidly these firms are setting up shop in UK retail parks.

8.4% dividend yield

So how can UK share investors get exposure to this attractive property sector? One way is by buying shares in Ediston Property Investment Company (LSE: EPIC).

This REIT is focused solely on retail park assets predominantly across Scotland, Wales and the north of England. Some of its largest tenants by income include DIY chain B&Q, discount retailer B&M, and clothing and food retailer Marks & Spencer.

Having robust companies like these on its books provides Ediston with added protection when things get tough. The chances of missed rent payments and of its premises being vacated are much reduced.

Consumer habits are constantly changing. And during this digital age demand for retail parks could steadily decrease as e-commerce clicks through the gears.

But given Ediston’s current low share price this is a risk I’d be prepared to take. Today the REIT trades on a forward price-to-earnings growth (PEG) ratio of just 0.3. A reading below 1 suggests that a stock is undervalued by the market.

What’s more, Ediston also boasts a meaty 8.4% dividend yield at recent share prices.

Another top REIT

Investing in property stocks is a particularly good idea during today’s era of high inflation. Real estate operators can effectively lift rents in response to growing cost pressures, providing profits with an extra layer of protection.

Residential property companies can offer even more security to investors, too. Paying the rent or the mortgage is one of life’s non-negotiables even during cost of living crises.

For this reason I’m considering buying shares in The PRS REIT (LSE: PRSR) for my portfolio. This UK share recorded an impressive 99% of rent collection in the year to June 2022.

Its actually my belief that earnings here might actually soar as rent levels in the UK balloon. Average rents in the UK increased 11% year on year in the third quarter, according to Rightmove.

Rising building costs threaten the profits for businesses like The PRS REIT. But the prospect of robust and prolonged rental income growth still makes this an attractive stock to buy. Demand for rental homes is rising sharply as supply is dwindling.

The company trades on a forward PEG ratio of just 0.7 at current prices. And its corresponding dividend yield sits at a healthy 4.7%.

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Real estate investment trust

Ediston is a real estate investment trust (REIT) that aims to provide shareholders consistent and lucrative returns through investing in commercial property. It targets three main commercial property sectors, which are offices, retail including warehouses, and industrial property.

As a REIT, Ediston must return 90% of profits to shareholders as dividends. I already own a number of REITs as part of my portfolio.

So what’s happening with Ediston shares currently? Well, as I write, they’re trading for 76p. At this time last year, the stock was trading for 68p, which equates to an 11% return over a 12-month period.

A dividend stock with risks

One of the biggest issues that any REIT faces is that of rent collection and vacancy in times of economic volatility. Current macroeconomic challenges, such as soaring inflation, rising costs, and a supply chain crisis are causing problems. A cost-of-living crisis has emerged. This could hurt Ediston as consumer spending could fall and occupancy levels in its properties could fall too.

Ediston has a lot of properties in retail, and a focus on retail parks, which could be negatively affected by the issues noted above. Performance and dividends could be affected by any downturn in rent collection and occupancy.

Next, as with any dividend stock, it is worth noting that dividends are never guaranteed. I know that dividends can be cancelled at any time at the discretion of the business. Typical reasons for this include economic volatility, a financial crash, or a pandemic like in 2020. Cancelling dividends allows businesses to conserve cash.

Why I’m buying the shares

So to the positives then. The first thing I look for when investing in any dividend stock is that of the dividend yield. Ediston’s yield is currently just under 7%, which is enticing. To provide some context, the FTSE 100 average is 3%-4%.

Next, Ediston shares look excellent value for money to me right now on a price-to-earnings ratio of just four.

Alongside these bullish aspects, I like the look of Ediston’s performance track record. For any dividend stock to provide stable returns, performance must be consistent. I am aware that past performance is not a guarantee of the future, however. I can see Ediston has recorded consistent revenue and gross profit for the past four years.

Finally, Ediston’s focus on retail properties could yield great returns for many years to come. I found that this specific property segment is tipped for growth. This is due to the e-commerce boom and rising demand for convenient click-and-collect options.

I believe Ediston could be an excellent dividend stock to boost my passive income stream. The shares look dirt-cheap, the dividend yield is great, and the business is focusing on a potentially lucrative segment for future growth too. I will be buying Ediston shares for my holdings.

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Buy-to-let is still a good way that investors can capitalise on soaring residential property prices. But declining tax relief, increasing day-to-day costs, and rising regulatory requirements have all made this form of property investment less attractive.

New rules introduced in recent years mean that landlords have to work much harder to make a decent buck too

Profits halve

The pressure on buy-to-let investors is rising particularly badly as mortgage rates soar. In fact data from Hamptons has revealed a shocking fall in landlords’ profits due to these increased costs alone.

The average landlord paying a higher rate of tax has seen their profits more than halve year on year in the 12 months to June, the estate agent said.

And it warned that the average second property owner could even endure losses if the Bank of England raises interest rates to 2.5%. The benchmark rate was lifted to 1.75% last week to curb soaring inflation.

REIT benefits

I think a better way to get exposure to Britain’s property sector is to invest in real estate investment trusts (REITs). In particular, I think they’re a great way to generate long-term passive income.

To be classified as a REIT a property company must pay a minimum of 90% of their profits to shareholders. This leaves no room for the board to back out of paying a dividend. If the firm is profitable it must make dividend payments to its investors. And this can give an investor a reliable passive income.

There are other big benefits of buying shares in a REIT, such as:

• They’re a tax-efficient way to invest in property.
• They give investors exposure to sectors they wouldn’t usually have (like shopping malls and healthcare centres).
• REITs attract large amounts of international capital that can be used to boost growth.
• They usually have long-term lease contracts that provide supreme earnings visibility.

2 top REITs I’m watching

There are plenty of top REITs I’m considering buying for my own portfolio. Take Primary Health Properties, for instance, a UK share that boasts a healthy 4.5% dividend yield.

This property stock invests in primary healthcare facilities like GP surgeries and larger multi-use medical centres. Demand for these sorts of new properties is booming due to the crumbling condition of existing facilities. And I expect them to keep rising as Britain’s population ages and the nation’s healthcare needs consequently rise.

I’d buy Property Health Properties even though it faces intensifying competition for acquisitions. And I’d snap up Ediston Property Investment Company too, a stock with a mighty 6.4% dividend yield.

This REIT specialises in operating retail parks. It’s a property segment that’s tipped for strong growth due to its convenience, growing choice of stores and as  e-commerce boosts demand for ‘click and collect’ services. I’d buy Ediston despite the short-term threat of rising store vacancies as consumer spending weakens.  

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#1: Central Asia Metals

I’ve recently tipped penny stock Steppe Cement as a top stock to buy because of its pivotal role in Kazakhstan’s urbanisation programme. Demand for the building material is likely to surge as construction in towns and cities picks up. For the same reason I’d buy Central Asia Metals (LSE: CAML), too, a copper miner in the transcontinental country.

Thanks to its high conductivity, malleability and resistance to disintegration copper is a popular material in the construction industry. And Central Asia Metals pulls this red metal from its Kounrad project in Kazakhstan, putting the business on the doorstep of this urban revolution.

Riding the electric vehicle craze

I also like Central Asia Metals because it’s a great way to play another twenty-first-century phenomenon: the electric vehicle (EV) boom. Copper demand is exploding as adoption of these low-emissions vehicles takes off. But this is not the only way Central Asia Metals is exploting the EV market. It can expect the zinc and lead it pulls from the Sosa mine in North Macedonia to soar as well. These materials are essential in the manufacture of car batteries.

Central Asia Metals is packed with potential, then. However, it’s also not without risks and any production problems at its Asian and European operations could hit profits hard. It’s also worth noting that political instability has risen in Kazakhstan in recent months and could ignite again at any moment.

Disruption to Central Asia Metals’ operations could follow, whilst fresh turbulence could hit construction activity in the country too and consequently demand for the miner’s metal. That being said, as things stand right now I think the rewards of owning this stock outweigh the risks.

#2: Ediston Property Investment Company

Inflation is heading through the roof and is something I as a share investor need to be prepared for. The tragic war in Ukraine has supercharged already-elevated levels of inflation in the UK as supply chain issues have worsened. The stalemate in Eastern Europe has raised the prospect that extreme price rises could persist too.

Reflecting this chilly outlook the Bank of England now warns that inflation here could beat its prior forecast of 7.25% by “several percentage points”. So I’m considering adding Ediston Property Investment Company (LSE: EPIC) to my portfolio. Property stocks have long proven to be a great hedge against inflation as the rents they charge tend to rise in line with broader prices.

Playing the retail revolution

I wouldn’t just buy this penny stock to protect me from the ravages of inflation, though. I think it’s a great way to capitalise on the changing way that we do our shopping in the post-pandemic age. You see Ediston operates retail parks up and down the country. The large shopping units these are home to are becoming increasingly popular as people prefer spacious shopping outlets over cramped high streets.

Retail parks also play a critical role in the online shopping industry, a quality that Savills says is attracting brands to consider their expansion in these retail destinations. The estate agency says that

“[these] large and comparatively low-rented units, combined with good car parking provision and accessibility means that retail park assets are suitable for servicing click-and-collect orders, customer returns and home deliveries.” Savills adds that this means shopping parks are essentially “functioning as last-mile fulfilment centres.”

A dirt-cheap penny stock

The Ediston share price has slumped despite that aforementioned boost that inflation will provide to its rent rolls. This fall is due primarily to fears that the cost of living crisis could hit its tenants hard, in turn prompting requests for rent reductions and resulting in empty lots as retailers go bust.

However, I think the scale of recent selling is over the top. At 78p per share the property giant is trading at an 11% discount from January’s two-year closing highs. I think this represents a juicy dip buying opportunity for me.

#3: Springfield Properties

A stream of positive trading updates have continued to flow in from Britain’s listed housebuilders. A number of encouraging home price reports have also flowed in, suggesting that Britain’s housing market remains rock solid since the turn of 2022. This makes me believe that ‘nearly’ penny stock Springfield Properties (LSE: SPR) remains an attractive buy.

In fact Scottish housebuilder Springfield (which trades at 146p) may be one of the savviest ways to play the housing market. This is because residential property prices north of the border are rising particularly quickly. Latest HM Land Registry data showed average prices in Scotland rise 11.2% year-on-year in December. That’s around half a percentage point higher than the UK average.

Record order books

The strength of market conditions can be seen in Springfield Properties’ private housing order book. This rose to record levels at the end of 2021.

The business is taking aggressive steps to capitalise on the favourable marketplace, too, and it recently entered the thriving private rented sector. Furthermore, Springfield also remains committed to expansion through acquisitions and in recent months snapped up Highlands-focussed developer Tulloch Homes for £56.4m.

I think the main danger facing housebuilders is that of raw materials shortages. It’s a problem that could send costs through the roof and even disrupt its construction plans. However, as of right now house price inflation continues to outpace the rate at which building product prices are increasing. And whilst I can’t be sure, I expect this to remain the case long into the future. So I’d happily buy Springfield Properties for my portfolio this April.

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That said, I think the long-term outlook for Ediston is highly attractive. And I’d use a 13% decline in its share price during the past month as a chance to buy it at a discount.

This property stock specialises in operating shopping parks, a part of the retail market which is performing strongly as e-commerce takes off. More specifically, Ediston’s properties have enough warehouse space and surrounding land to enable the business to ride soaring demand for ‘click & collect’ services from online shoppers.

Ediston’s share price is, despite heavy weakness more recently, up 12% over the past year. I expect the business to start to head higher again sooner rather than later.

Too cheap to miss?

Motor retailer Pendragon (LSE: PDH) could also suffer if shopper budgets continue to fall. It also faces some near-term peril as supply chain problems hit auto production and the prospect of stock shortages loom.

However, following recent share price weakness — Pendragon has just fallen to its cheapest since December — I think this penny stock could be too cheap for me to miss. Today, Pendragon trades on a rock-bottom price-to-earnings (P/E) ratio of just 6.8 times for 2022.

As a long-term investor, I think the car retailer has plenty of appeal. And I think it’s a great way to exploit rocketing demand for electric vehicles (EVs) in particular. Latest Society of Motor Manufacturers and Traders data shows sales of battery and hybrid vehicles leap 92.5% year-on-year in January. It’s a trend I expect to continue as fears over the climate crisis steadily increase.

Pendragon’s share price is up 46% during the past 12 months. I expect more robust increases over the long term as well.

Another top penny stock for the EV boom

I’d also snap up Phoenix Copper (LSE: PXC) shares to ride the EV revolution.

The red metal is a critical component in these low-emission vehicles, due its high connectivity. This is why analysts at ING Bank think copper loadings in cars and buses will likely leap to 3.2m tonnes a year from 440,000 tonnes in late 2021. They also believe copper demand in charging infrastructure will rise almost fivefold over the period, to 47 tonnes per annum.

Phoenix Copper, which owns the Empire metal mine in Idaho, should be well-placed to capitalise on rising copper consumption. That’s notwithstanding any revenues-hitting problems the business may encounter in developing its US asset.

Phoenix Copper’s share price has dropped 14% in the past week. This has eradicated all gains it has made over the prior 12 months. And, in my opinion, this makes the penny stock a highly attractive dip buy for me.

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All hail the King

I think profits at Kingspan Group (LSE: KGP) could soar as the fight against climate change revs up. The building materials business is perhaps best known for the insulation products it supplies. I think sales of such materials will soar as housebuilders use larger amounts in their homes and people retrofit their existing homes.

A study by the Royal Institute of British Architects reveals the huge positive impact insulation materials have on reducing emissions. It says that improved insulation, better windows and gas boiler replacement in 3.3m UK suburban homes could cut the country’s carbon footprint by 4%.

The government’s Green Homes Grant is due to end at the end of next month. This could have a big near-term effect on Kingspan’s revenues in the UK. But it’s my view that fresh measures could be resurrected as fears over the environmental emergency inevitably rise.

Besides, it’s important to remember too that Britain accounts for just 16% of Kingspan’s revenues. The business sources almost 60% of sales from other European territories, regions where legislation to help the planet is a very hot topic.

The downside is that Kingspan’s operations are highly cyclical. So any fresh weakness in the global economy could severely damage its revenues. Still, as the fight against climate change intensifies, and housebuilding rates rise to match growing populations, I think this penny stock could still deliver big shareholder returns over the long term.

Another top penny stock to buy

Increasing my exposure to e-commerce is something I’ve strived to do in recent years. Packaging manufacturer DS Smith and warehouse operator Tritax Big Box REIT are a couple of stocks I’ve bought as online shopping volumes continue to increase.

Penny stock Ediston Property Investment Company (LSE: EPIC) is another I’m thinking of buying for the digital revolution too. The property giant specialises in operating retail parks. These are the sort of spaces which are perfect for the ‘click and collect’ age.

The retail units this penny stock lets out tend to be larger than the usual high street or shopping mall space. This gives retailers the space to store products that people order online. It’s also often simpler for customers to pick up goods from shopping parks as they can slip their purchases straight into the back of their car after collection.

The main threat to Ediston is the potential for fresh economic downturns that could hit consumer spending. This may in turn result in retail tenants asking for rent discounts or possibly even vacating.

Still, this is a risk I’d be prepared to swallow. I think the company’s long-term outlook — combined with its bulky 6% dividend yield — make it too good to miss.

The post Revealed! 2 of the best penny stocks to buy right now appeared first on The Motley Fool UK.

The property powerhouse

Large parts of the retail sector are under the cosh as internet shopping explodes. But while the high street is feeling the strain, the outlook for retail parks remains quite solid. This makes Ediston Property Investment Company (LSE: EPIC) arguably one of the best property stocks to buy right now.

The boom in ‘click and collect’ means Ediston could be an indirect winner from the e-commerce surge. Retail units with more space and with better accessibility by car are likely to be in increasing demand as companies try to latch onto this theme.

Additionally, it’s thought that retail park stores are more popular with shoppers than crowded shopping centres and high streets following the Covid-19 outbreak, and that they’ll continue to be preferred.

I also like the fact that rents at retail parks tend to be much lower than other retail locations. This is especially important at a time when retailers’ margins are being crushed by business rates and rising labour and input costs. It provides another reason to expect demand for Ediston’s properties to pick up considerably.

Rent rolls and, consequently, earnings at Ediston could take a smack in the immediate future however. Rising Covid-19 cases in the UK mean that restrictions on non-essential retail could be reimposed. Furthermore, falling consumer spending power in the wake of soaring inflation could also indirectly hit the penny stock’s profits.

That said, as a long-term investor the threat of such temporary turbulence doesn’t put me off. I’d happily buy this cheap UK share now or in the near future.

Another penny stock on my radar

I also believe Topps Tiles (LSE: TPT) is a highly attractive, cheap UK share to buy. That’s even though its operations are highly cyclical and so it could suffer considerably if the British economy skids lower.

First of all, I’m encouraged that the robust housebuilding sector should keep sales at the retailer rising solidly. Latest Office for National Statistics data showed average property prices soar 10.6% year-on-year in August. This was up from the 8.5% increase the prior month.

All this illustrates the massive homes shortage on these shores that I believe will persist for years to come. In this climate major housebuilders should continue busily building and demanding Topps Tiles’ product in massive quantities.

I’m also expecting sales there to remain strong as the country’s DIY craze continues following recent Covid-19 lockdowns. The retailer’s huge investment in its e-commerce channel should help it to win customers in the years ahead too.

Like Ediston Property, this is a top penny stock I’d buy in November and hold for years.

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I used to own Cineworld shares but I sold out last autumn during the then-height of the health crisis. I originally bought the leisure share because the conveyor belt of ticket-moving Hollywood blockbusters was speeding up with franchises that pushed the global box office to repeated record peaks before the pandemic struck. The onset of the pandemic forced me to revisit my bullish take, however, as Cineworld’s gigantic debt pile made me fear for its very existence as it closed its doors.

The cinema operator is clearly in better shape than it was in late 2020. Its cinemas are open again and it’s taken steps to bolster its balance sheet too. This is all reflected in Cineworld’s share price surge since then. There’s still a possibility that Cineworld could make UK share investors terrific returns from Tinseltown’s endless stream of sequels and reboots of popular movie franchises. Its expensive entry into the gigantic US market could still pay off in the long term.

But I’m afraid the stock still carries too much risk for my liking. The ongoing Covid-19 crisis still puts it in great danger regarding that mountain of debt. And its long-term future is in danger as the US streaming giants ramp up investment in programming and technology. Just today Netflix announced a deal that will see it make a raft of films and shows from the family-friendly Roald Dahl canon.

A better penny stock to buy

I’d much rather buy penny stock Ediston Property Investment Company (LSE: EPIC) over Cineworld right now. The outlook for many UK shares involved in retail is bleak as e-commerce batters the bricks-and-mortar segment. But I think retail park operator Ediston could actually thrive during the digital shopping revolution.

As the Local Data Company explains: “Demand for space on retail parks is increasing as brands search for larger spaces to fulfil online sales and facilitate click and collect services.” It expects vacancy rates for retail parks to decrease in the 12 to 18 months “as more deals are done by occupiers looking to invest in this type of asset” following the carnage caused to the sector by Covid-19.

Naturally a prolonged fight against the coronavirus could hit retail park tenants and consequently profits at Ediston. But I’d still buy it because I think its long-term outlook remains extremely bright. The penny stock’s shopping parks account for more than 70% of its total property portfolio. And pleasingly the business plans to focus future investment in retail warehouse spaces.

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