Low valuations and high dividend yields have put UK REITs on the radars of some big names in private equity. But there are still some names that are well worth a look at the moment.

REITs

REITs are companies that own and lease properties to tenants. Different ones focus on different assets, from data centres to theme parks and pretty much everything in between.

For investors looking for passive income, REITs have a big attraction over other dividend stocks. While other firms can choose to cut their dividend if they want to, REITs can’t. They’re required to pay out 90% of their taxable income to investors as dividends. So the only way their dividends go down is if their rental income drops. 

Not being able to choose what to do with their cash can be a challenge. But in terms of income, REITs can’t do what Diageo has just done and decide to retain cash instead of distributing it.

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.

A steady 7%

Primary Health Properties (LSE:PHP) is one example. The stock comes with a 7% dividend yield, which means a £20,000 investment in a Stocks and Shares ISA is set to return £1,424 a year.

The firm has a lot of what REIT investors often look for. It has high occupancy rates, strong rent collection metrics, and long-term leases (they have almost 10 years to expire, on average).

Investors should note though, that the average debt maturity is around five years. This creates a risk of having to refinance at higher rates without being able to increase rents to compensate.

Primary Health Properties though, has a strong record of managing this kind of challenge. It’s increased its dividend for 30 consecutive years, so it’s seen bigger issues before and kept going.

Higher risk, higher reward?

By contrast, shares in Regional REIT (LSE:RGL) come with a 10.13% dividend yield – enough to turn £20,000 in a Stocks and Shares ISA into something generating £2,026 a year.

However, that big dividend comes with some more obvious risks. The firm’s portfolio of regional office buildings has much lower occupancy ratios, and the average lease is significantly shorter.

Regional REIT though, has a bolder growth plan than Primary Health Properties. It aims to sell off some of its weaker assets, upgrade others, and emerge in a much stronger position.

It’s an ambitious plan and isn’t guaranteed to work. But a 10% dividend yield means the potential rewards on offer for passive income investors willing to take the risk could be huge.

Income opportunities

For investors looking for dividend stocks, I think the UK’s REIT sector is terrific. And for those that can, a Stocks and Shares ISA is a great way to avoid having to pay dividend taxes.

Those looking for a steady company that fits the traditional profile might like Primary Health Properties. And Regional REIT offers something less conventional, but much more dynamic.

At today’s prices, I think either’s worth considering. So passive income investors can make their own minds up which they prefer.

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Being required to return cash to shareholders can create challenges that investors need to keep an eye on. But with dividend yields up to 8%, they can be well-compensated for the risks involved.

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.

REIT investing

As with most industries, REITs are often about having the right product in the right place. And there are two main variables for companies to consider – industry and location. 

In recent years, there’s been a clear theme emerging. Demand for warehouses has surged as more and more shopping goes online and office space has become less popular. 

As far as the UK goes, demand has – unsurprisingly – been strongest in London and within the M25. That’s been relatively resilient despite some of the recent shifts in the industry.

As a result, a lot of REITs have been zeroing in on the strong demand. But that’s only one half of the equation. The other half is supply. 

Doing things differently

When everyone else is chasing the same obvious opportunity, there can be gaps that are worth exploiting. This is exactly what Regional REIT (LSE:RGL) looks to do. 

The firm has a portfolio of properties located away from the capital. And a large number of them are office buildings – probably the least popular asset class in the industry at the moment.

As a result though, competition’s much more limited. That means customers have fewer options and landlords have stronger negotiating positions when it comes to renewing leases. 

Regional REIT’s strategy is definitely an interesting one. And big dividend means there’s a strong incentive for passive income investors to take a closer look. 

Risks and opportunities

Regional REIT’s portfolio is a bit of a mixed bag. It has some high-quality assets, but it also has a number of properties that are less desirable and difficult to improve in a meaningful way. 

The firm’s plan is to sell these off, use the proceeds to improve its balance sheet and return cash to shareholders, and create an attractive business in the process. And that’s a really exciting idea.

This, of course, depends on the valuations the company can achieve for its assets on the property market. There are no guarantees here and this has been a challenge recently.

The issue is especially important right now, with the firm having recently refinanced its debt. There’s a question of what higher interest payments will mean for the firm’s dividend.

Dividend durability

In its latest update, Regional REIT announced that it’s targeting 8p per share in dividends for 2026. That’s down from the 9.4p the company returned last year.

A lower dividend is never a good thing, but having refinanced its debt, the firm has just navigated what should be its biggest challenges for some time. And there’s still an 8% yield on offer.

Given this, I’m looking seriously at the stock as a potential opportunity. With my portfolio mostly geared towards growth, it could offer me some nice diversification and balance.

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Why the stock is down

I’m talking about the Regional REIT (LSE:RGL). It focuses on regional office properties, mainly commercial buildings outside London’s M25. It owns and manages a portfolio of these and aims to generate income and capital growth from rents and asset value increases.

Over the past year, the stock ‘s fallen 12%, which is broadly in line with the portfolio’s net asset value (NAV) decline. In theory, these should correlate well with each other, although I note that the stock trades at a long-term discount to the NAV. This typically indicates weak sentiment towards the company, but in years to come it should reduce to be closer to the NAV.

The drop in the NAV reflects the decline in value in the commercial property market. However, I don’t see this as a big risk going forward. Several of my friends are slowly being forced back to working three or four days a week in the office. In a few years’ time, I think most traditional businesses will be back with staff in the office every day as standard. Based on this reasoning, I think the REIT’s long-term outlook’s positive.

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.

Juicy income

Historically, Regional REIT’s paid income out quarterly. From looking at the dividend per share over the past year, the rise in dividend yield has come partly from the payout increasing, as well as the stock falling.

Aside from the yield, the main thing I look at is the dividend cover. It’s currently 1, which means earnings per share can completely cover the dividend. This is a good sign, as the business isn’t paying shareholders more than it can actually afford. One risk is that if it falls below par, then it’ll start eating into retained earnings, which isn’t great.

Another factor I check for REIT dividends is rent collection. In the latest quarterly update, this stood at 97.7%. I want this to be as close to 100% as possible, so that the company can maximise the revenue potential.

The outlook from here

Back in November, the company said: “Leasing momentum has been negatively impacted by the uncertainty stemming from the broader economic environment and specifically by the inconsistent messaging from the UK Government regarding the forthcoming budget“.

This has now passed, and I don’t feel it was as bad as many expected. Of course, it’s a risk going forward, but I think the next report should detail more management certainty about the UK economy for 2026, helping the stock. Overall, I think it’s a good income share for investors to consider.

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Under REIT rules, companies must pay at least 90% of annual rental earnings out in dividends. This still leaves payouts sensitive to profits performance, but it also provides a higher level of income visibility for investors than most other stocks.

What’s more, with diversified tenant bases and clients locked onto long-term contracts, these businesses enjoy relatively stable cash flows they can use to pay dividends.

So what are the hottest REITs to buy right now. In my opinion, three of the hottest to consider are:

• Schroder European Real Estate Investment Trust
• Alternative Income REIT
• Regional REIT (LSE:RGL)

Each of these property powerhouses offers a forward dividend yield of at least 10%. Want to know what makes them true dividend heroes?

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.

Euro giant

Schroder European Real Estate Investment Trust holds a top-class portfolio of properties in continental hotspots. We’re talking about highly desirable cities with strong economies and infrastructure. Think Paris, Berlin, and Hamburg, to name a few of its locations.

It’s a winning strategy that leads to reliable rent collection and strong occupancy (portfolio occupancy was 97%, latest financials show). The trust’s exposure to different sectors like logistics, office, retail, and data centres also gives it strength.

The forward dividend yield here is 8.1%. I think it’s a top trust to consider, even though adverse currency movements could take a bite out of earnings.

Another diversified REIT

Like the Schroder trust, Alternative Income REIT takes a diversified approach to the property market. If anything, things are even more wild and wonderful — they range from hospitals and petrol stations, through to hotels, gyms, and thermal power plants.

Its rent collection is even higher, at 100%. And its tenants are locked down on ultra-long contracts, providing protection from (if not totally eliminating) cyclical pressures on rent collection. The weighted average unexpired lease term for its 23 tenants sits at 17 years.

With more than 92% of rental income linked to inflation, too, Alternative Income is in great shape to grow shareholder payouts. For 2026, the dividend yield is a brilliant 8.5%.

Double-digit yield

At 10%, Regional REIT is today the highest-yielding property trust on the London stock market. It carries greater risk than the other contenders we’ve looked at, reflecting its narrow exposure to the UK and broader weakness in the office market in which it specialises.

This has caused its share price to slump over the past year (down 10%). But is the bad news now baked into the trust’s share price? I think it might be. As well as having that enormous yield, Regional REIT trades at a 51% discount to its net asset value (NAV).

To my mind, it’s a top recovery share to consider. The REIT retains a high-quality portfolio, and is selling non-core assets to boost occupancy and repair the balance sheet. As for dividends, this year’s predicted payout is covered more than twice over by expected earnings, providing a wide margin of error.

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Take the following large- and mid-cap shares: Octopus Renewables Infrastructure Trust (LSE:ORIT), Henderson Far East Income (LSE:HFEL) and Regional REIT (LSE:RGL). The dividend yields on these shares are enormous, coming in at 10% (or just above) for 2026.

I think investors should consider these UK shares for a large and growing dividend income. Want to know why?

A top REIT

As a real estate investment trust (REIT), Regional REIT must pay at least 90% of property rental profits out in dividends each year. This is in exchange for juicy tax breaks like protections from corporation tax.

This rule doesn’t guarantee a substantial and increasing passive income on its own. But it provides greater dividend visibility than most other dividend shares provide.

Regional REIT can sometimes experience occupancy issues that impact earnings. Rent collection issues can also naturally spring up during downturns. However, the investment trust’s large portfolio helps to reduce such threats to shareholder returns.

The company had a total of 740 tenants spread across 123 properties at the midpoint of last year. For 2026, the dividend yield here is a gigantic 10.3%.

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.

Look East

Henderson Far East Income is an investment trust that holds shares in 68 different Asian companies. For this year, it offers an even-higher 10.6% dividend yield.

Investing in emerging markets can be a wild ride at times. Economic and political conditions can change rapidly, impacting corporate earnings (and by extension, shareholder returns) for better and worse.

But Henderson Far East been able to navigate such volatility and still deliver excellent dividends. This is thanks in part to its diversified portfolio that spans different countries and sectors. It also reflects the excellent stock-picking pedigree of its management team.

Annual dividends here have risen every year for around two decades. I’m expecting them to keep growing as Asia’s developing economies rapidly expand.

10.7% dividend yield

Octopus Renewables Infrastructure is one of the top 10 highest-yielding investment trusts in the UK. This is thanks to its strong cash flows that support large dividends year after year.

As a renewable energy producer, the company benefits from steady demand across the economic cycle. This alone doesn’t guarantee stable cash flows and profits. Clean electricity sources are famously sensitive to weather conditions — when the wind doesn’t blow, for instance, power generation can fall off a cliff, impacting earnings.

But Octopus’s diversified portfolio helps reduce this threat. It produces power from onshore and offshore wind farms and solar assets. It also owns battery storage plants. And what’s more, its projects can be found across the UK, Ireland and Mainland Europe, reducing exposure to any single weather pattern.

I think this could be a great long-term income stock to consider as the green energy transition accelerates.

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Let’s be realistic – there’s no way to get a risk-free return of 9.45%. But there’s a real chance the stock market is overestimating the significance of the firm’s challenges at the moment.

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.

No, no, no?

Regional REIT looks like a pretty unappealing business on the surface. As the name suggests, it owns a portfolio of commercial properties – mostly offices –  largely located outside the M25.

Now, artificial intelligence (AI) might mean that nobody ever goes to an office again and this would be a big problem. But more realistically, demand for office space has been weaker than it was before the pandemic.

This shows up in the firm’s metrics. The worst thing for a landlord is empty buildings and around 25% of the firm’s portfolio is vacant – and that’s a lot compared to other REITs.

There’s also a debt maturity coming in August 2026 and the average lease has around three years, which isn’t long. Given all of this, why on earth would anyone take a second look at the stock?

But…

One thing to note about Regional REIT is that its shares trade at a 50% discount to the firm’s net asset value (NAV). And I think that’s hugely important from an investment perspective.

While the firm’s overall occupancy rate is around 75%, it has a class of high-quality assets that are much more popular. Occupancy in this part of the portfolio is around 88%.

These core assets are valued at £458m by themselves. And that’s about £35m more than the entire firm’s market value (£162m) and its net debt (£262m) combined.

I think that means investors don’t really need to worry about the weaker parts of the portfolio. The company’s looking to sell them off and anything it gets is a bonus.

Dividend yield 

From a passive income perspective, the stock looks very attractive. The 9.45% dividend’s fully covered and it looks set to remain that way even with the portfolio divestitures.

Selling off assets should result in lower rental income. But if Regional REIT uses the proceeds to pay down debt, the net result should be that earnings go up. This is because the net initial yields in this part of the portfolio are below the firm’s average cost of debt. So it should be able to more than offset the falling income.

As a result, I expect Regional REIT’s dividend to stay covered for the foreseeable future. And that makes an opportunity for income investors that’s actually hard to ignore.

Appearances can be deceptive

Regional REIT isn’t exactly a looker. When I look closely at the business though, I think the stock’s impossible to ignore. The discounted valuation means the weaker assets can largely be left aside.

The company’s plan to sell these off should strengthen earnings and dividend coverage. That’s why the stock’s going on my list of shares to buy next year.

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Company details

I’m talking about the Regional REIT (LSE:RGL). As the name suggests, the property portfolio is primarily in regional UK centres, outside the M25 motorway. In case Londoners forget, there is a world outside of Zone 5!

One unique feature about the REIT is that it holds a mix of office, industrial, retail, and residential properties. Typically, other REITs would focus on just one area of the market. Yet, like other companies in the sector, Regional REIT makes money through long-term rental agreements. This is a key element that makes cash flow strong, which ultimately should translate to making the dividend streams predictable.

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.

A generous dividend yield

At the moment, the yield stands at 9.45%. Over the past year, the share price has fallen by 18%. This is one reason why the yield has risen. After all, the dividend yield is calculated from the dividend per share and the share price. So if the stock falls, it acts to push up the yield.

Although some might see this as a red flag, I’d quickly add that the dividend per share has also been increasing. Just two years ago, the total payment was 5.25p. It looks like the total for 2025 is set to finish at 10p. So there’s clearly growth here, which is important.

The yield might be high, but in the latest half-year report from September, management said the dividend was fully covered. This means the income paid is taken from earnings, with earnings alone sufficient to pay the dividend. This shows that it’s sustainable and not stretching the company.

Looking ahead

The September update provided several signs that the dividend could be sustainable. There is strong lease activity, with the firm recently securing new lettings and lease renewals. For example, it reported £1.6m of new or renewed rent, beating their estimated rental values.

Further, the team has a process of selling non-core assets. This generates cash that can be used to reduce debt or reinvest in higher-return properties.

One risk I do see is the ongoing work on debt refinancing. A major debt facility matures in August 2026, and if interest rates remain high or financing conditions tighten, refinancing could be expensive or difficult.

Even with this concern, I don’t think the yield is too good to be true. As a result, I think it’s an income stock for investors to consider as part of a broader diversified portfolio.

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REITs often come with high dividend yields as a result of having limited growth prospects. But with an 8% yield, Regional REIT (LSE:RGL) might offer investors the best of both worlds.

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.

Portfolio

One of the most important things with any business is the supply and demand equation. Whether it’s software or real estate, that’s where the ability to charge high prices comes from.

A lot of REITs – understandably – focus on sectors where demand is strong. One of the most prominent examples in recent years has been warehouses and industrial distribution facilities.

Regional REIT, by contrast, focuses on the other side of the equation. Offices – specifically, high-quality ‘Grade A’ offices – have been out of fashion recently, but this means supply is weak.

Office construction in the UK is at a 10-year low, meaning a favourable equation for the owners of the best assets. And Regional REIT owns a portfolio of offices located outside the M25.

Growth

Regional REIT’s current occupancy level is just under 80%, which is low compared to other REITs. But that gives the firm clear scope for future growth. 

One reason for the low occupancy level is some of its properties are older and less attractive to tenants. But the firm is currently pursuing a strategy of disposing of some and investing in others.

In general, growth is a challenge for REITs. Being required to distribute the cash they generate to investors means expansion has to be financed through debt or equity.

Regional REIT’s Capex to Core initiative therefore might give it some unusual growth prospects. And combined with an 8% dividend yield, this could be an attractive proposition for investors.

Risks

One thing to note about Regional REIT is that the firm has had some tenants exercise breaks in their leases recently. That’s likely to cause rental income to be lower in 2025. 

In general, this has been the result of companies either moving to larger premises or relocating. So, while it’s not ideal, it’s part of the normal course of business that investors need to be prepared for.

There isn’t much to do about this, but investors should make sure they’re getting a good enough return to justify the inherent risk. And a key part of this is the dividend.

According to the latest results, the 5p per share interim dividend is covered by its income. So the firm should be able to maintain its investor returns while it looks to re-lease its vacated buildings. 

Passive income

I think investors looking for passive income should be looking at REITs. But sometimes the best opportunities aren’t in the most obvious places.

The office sector is a good example. But a shortage of Grade A properties and a lack of new buildings make it an interesting opportunity that investors might be overlooking. 

At today’s prices, £1,000 buys 823 shares in Regional REIT – enough to earn £80 a year in dividends. And I think it’s a good candidate to add diversification to a passive income portfolio.

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So real-estate investment trusts (REITs) can be attractive from this angle. Here are two for investors to consider.

Improving sentiment

First up is the Regional REIT (LSE:RGL). The trust is focused on owning and leasing out income-producing commercial property. This is predominantly regional UK offices located outside London’s M25. Its portfolio is broadly diversified, spanning offices including industrial and select retail. Ultimately, over 90% of its valuation is tied to regional offices, hence the company name.

Over the past year the stock’s down 7%, with a current dividend yield of 7.35%. The yield’s high because the primary way it makes money is earning income from long-term leases across a diversified tenant base. To maintain its favourable REIT status, it must distribute a high percentage of its earnings as dividends to shareholders. Therefore, I think the outlook for further income payments is positive.

One reason the stock’s been down over the past year is the weaker sentiment around offices. The latest full-year report spoke of “another challenging year for both the property market and the regional office sector in particular”. Many are indeed still working from home and this remains a risk in the future. However, I’m starting to see the tide changing here, with more companies demanding employees return to the office, albeit not on a five-day-week basis quite yet, if at all.

As a result, I believe the Regional REIT could experience increased demand for its portfolio properties in the coming year as the trend begins to shift.

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.

An ESG favourite

Another option is the Social Housing REIT (LSE:SOHO). By contrast, this trust focuses on providing Specialised Supported Housing (SSH) across the UK. Its properties are leased to approved providers (typically housing associations), who receive government support or housing benefit.

An advantage here for business operations is that revenue is indirectly linked to the government, which I see as a good thing when it comes to the certainty of payment. Further, it has an inflation-linked rent and lease structure. This means a significant portion of rents adjust annually in line with CPI or housing benefit policy, helping preserve income in inflationary conditions. Given that UK inflation’s moving higher again, this is positive going forward.

It’s also a company that’s high up on the ESG scale. Annual social impact reporting shows that every £1 invested generates £2.19 in social value. This ESG strength supports steady asset performance and stakeholder confidence.

One risk is the fact that interest rates might need to stay higher for longer. This means that new debt or refinanced debt could be more expensive than previously planned, increasing overall costs.

Further, it’s still a company that needs to attract investors. It has a dividend yield of 8.03% and the share price is up 10% in the past year, so it ticks these boxes.

I think both REITs are attractive for income, and are worth considering for investors with this objective.

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Starting with numbers

A good starting point for this strategy is to note the average yield of the FTSE 100, which is 3.31%. So, this is roughly the yield that an investor can obtain by buying an index tracker that pays out the dividend component. This means the investor needs a lump sum of £755,287 to get the targeted £25k annual second income.

This level of wealth is not likely available for the average person. Fortunately, this isn’t the only way that the goal can be obtained. Instead, investing smaller amounts over a longer period can be a strategy to reach a pot size of £755k further down the line.

For example, if someone was trying to reach the £25k goal in 20 years (maybe tying in with retirement), investing £2,250 a month could enable the portfolio to grow to the needed level over that timeframe.

Tweaking the yield

Another option could be increasing the dividend yield. If someone actively picked a smaller pool of a dozen stocks with high yields, I believe they could achieve an average portfolio yield of around 7%.

Using a 7% yield would mean an initial investment size of £357,143. Alternatively, investing £680 a month for two decades could also make the goal a reality. As can be seen, the higher the yield, the lower the amount of cash needed. However, it’s important to appreciate that the dividend yield changes over time. So in years to come, the yield could be higher or lower than anticipated.

It may be that all of these options are unachievable. In that case, dialling back the target income amount could be a wise choice.

A stock for consideration

When looking for ideas in the 7%-yield range, I like the Regional REIT (LSE:RGL). It’s a UK-listed real estate investment trust that focuses on owning and managing regional office and light industrial properties outside of London.

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.

It makes money primarily through the rental income from the tenants signing leases. When the property values rise, this should also help to lift the share price. This is because it’s linked to the net asset value (NAV) of the portfolio. The dividend is seen by many as sustainable because the management team must distribute at least 90% of property rental profits as dividends to keep REIT status.

Further, the multi-year leases often give good visibility over cash flow, making it easier to anticipate any needed changes to dividend payments. However, one risk is that the post-pandemic shift toward hybrid and remote working has hit office occupancy levels. This is especially true outside London, where demand recovery is slower.

Even with that concern, I think income hunters could consider the stock for their portfolio.

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