That’s why many of them suffered losses through 2023 and 2024. But I think their high dividend yields and commitment to shareholder returns make them great additions to consider for passive income portfolios.

Now, with the industry showing signs of improvement, it may be time to consider some top UK REITs.

Here are two that caught my attention recently.

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Target Healthcare REIT

Real estate investment trusts (REITs) are hot again, with many enjoying notable attention this year. One of my favourites, Primary Health Properties, is up almost 10%, while maintaining a juicy 6.9% yield.

But now I have my eye on a potential competitor — Target Healthcare REIT (LSE: THRL). The stock boasts a 5.9% yield and is up an impressive 16.7% this year already. Yet despite this, its price-to-earnings (P/E) ratio remains low, at 8.45. This suggests it still has a lot of room to grow.

And I’m not surprised — at 98p per share, it’s still 20% below its five-year high set in July 2021.

However, the risk of a return to high interest rates is ever-present, not to mention regulatory and policy changes in healthcare or housing. Both these factors can hurt the share price, compounded by any additional expenses from rising materials costs, maintenance issues or environmental disasters.

It’s worth nothing that REITs tend to enjoy limited capital growth but make up for it with strong and reliable dividends.

What really caught my eye about Target was the company’s market cap relative to revenue, measured by its price-to-sales (P/S) ratio. At 8.48, it suggests investors are willing to pay a high price for the stock. This, combined with a low P/E ratio, suggests strong growth potential.

Sirius Real Estate

Sirius Real Estate (LSE: SRE) is a property company focused on owning and managing business parks, flexible offices and industrial spaces in Germany and the UK. It has established a reputation for generating stable rental income from small and medium-sized enterprises (SMEs), benefitting from strong operational efficiency and regional diversification.

One of the main attractions of the REIT is its solid revenue growth, which rose 7.2% year-to-date (YTD), reflecting high tenant demand and effective asset management. The company has a respectable dividend yield of 5.6%, appealing to income-focused investors, and its P/E ratio of 10.8 suggests the stock is currently undervalued relative to earnings.

However, there are risks. Like Target Healthcare, Sirius is affected by macroeconomic issues like high inflation and interest rates. This puts pressure on tenant affordability and can lead to reduced property valuations. The company also has exposure to currency fluctuations between the euro and the pound, potentially affecting reported results. Moreover, future rental income growth may slow if SMEs face economic strain.

With a 1.38bn market cap, it’s larger and more well-established than Target. This makes it a more defensive play, adding stability but limiting its growth potential.

Are they the best? Saying so is very subjective and depends on an investor’s individual criteria. But together, I think the two are worth considering as part of an income portfolio aimed at achieving long-term dividend returns.

The post Are REITs the best UK dividend shares on the stock market to consider right now? appeared first on The Motley Fool UK.

An alternative banking choice

The first stock I’m thinking about is Paragon Banking Group (LSE:PAG). The bank’s an alternative to the major FTSE 100 household names, although this isn’t a small firm by any means. The company’s in the FTSE 250 and has a current market-cap of £1.57bn.

Over the past year, the stock’s risen by 63% yet the dividend yield‘s still above average at 5.15%. The latest results for fiscal H1 2024 showed a jump in profit, with factors including “good loan growth, improved margins and tight cost control”. This allowed it to increase the dividend per share payment by 20% versus the same period last year.

As the business is growing, it’s diversifying risk across different divisions. For example, it’s making a push towards commercial lending, with this making up 48% of total lending for H1 2024. I think this is a smart move, as being too exposed to retail customers can be a risk.

One concern is the fact that cuts to the base interest rate will reduce the profit margin it makes on loans and deposits. However, this is a factor that all those in the banking industry will have to deal with going forward.

Getting real with real estate

Another idea is Sirius Real Estate (LSE:SRE). Also in the FTSE 250, the real-estate investment trust (REIT) owns a portfolio of business parks, offices and mixed-use workspaces in the UK and Europe. The stock’s jumped by 11% over the past year.

Due to its REIT status, the Sirius management team has to pay out a certain amount of profits as a dividend to shareholders. For the past few years, it’s paid out two dividends a year, equating to a current dividend yield of 5.38%.

The latest business update showed a 86.2% occupancy rate in the UK, spread across 3,739 tenants. These range from blue-chip companies to SME’s. I like the fact that it has a broad range of clients. It means even if it loses a couple, or if one particular industry suffers, it shouldn’t have a materially negative impact.

Looking forward, I’m optimistic about commercial property coming back into vogue. I’m hearing about more and more firms looking to enforce a stricter office working policy and moving to a more hybrid work from home stance. This should keep tenant demand high for Sirius.

The net debt-to-EBIDTA level is 5.6 times. This is high, in my view, and could be seen as a risk. The management team needs to keep a close eye on this.

I like both ideas, but think Paragon just edges it for me. I’m seriously thinking about investing the £300 for October in that one.

The post With a spare £300, here are 2 top dividend shares I’m thinking of buying now appeared first on The Motley Fool UK.

But with a 5.3% dividend yield and an 11.5% compound annual growth rate in the share price over the past decade, this company could be different. As I write, Sirius Real Estate (LSE:SRE) is selling at just £0.98 per share and 30% below its all-time high.

Investing in German property

The company invests in and acquires commercial property to provide workspace for small-to-medium-sized businesses in Germany and the UK. However, 79% of its revenue comes from the former country.

I’ve broken down its revenue from operations into two distinct categories:

1. Investment property income
2. Managed property income

The difference between these two is that through the managed property segment it generates revenue from properties it doesn’t own but helps to operate.

I like that the business has a wide range of office offerings. Everything from traditional business spaces to workshops are available through Sirius. This allows its target market to be slightly wider than if it just offered properties for traditional use cases.

Analysts expect high growth

Analysts are predicting its earnings before interest, taxes, depreciation and amortisation (EBITDA) to grow at an 11.5% compound annual growth rate over the next two years.

That’s important to me because it means the company should have a healthy future ahead of it (at least in the medium term), according to a lot of experts in the field. It helps me decide if I’m getting a good deal or not. After all, I want growth, not just a cheap price.

Is it value for money?

Right now, the company has a price-to-tangible-book ratio of 1.11, which means investors are paying just slightly more than the total value of physical assets owned by the firm.

But its price-to-earnings (P/E) ratio without non-recurring items is just 13.4. That’s way lower than its norm of around 18 over the past decade.

Considering both of those metrics, I think it’s reasonable for me to consider the shares as undervalued.

A look at the risks

Of course, the real estate business is renowned for the use of debt to finance property purchases, and this company is no exception. It’s one of the biggest risks I see with the investment.

As I write, it has about equal liabilities to equity. While that’s not terrible for its industry, it’s worse than normal for Sirius. The pandemic seriously knocked the businesses Sirius relies on for its rental income. So, I’m not surprised it’s got more debt than usual at the moment.

This could mean that if the firm gets hit by another crisis, the negative effects could be even more pronounced because it’s already been weakened. As the business is heavily dependent on Germany, it would only take an issue in that one country for things to go awry.

I still love the investment

Despite the risks, Sirius is on my watchlist because I find the dividend yield of over 5% and good appreciation in share price over the past decade really promising.

So, I’ll look at potentially investing in it later in the month.

The post Down over 30% with a 5.3% dividend yield! This looks like a winning penny stock to me appeared first on The Motley Fool UK.

I reckon stock market conditions look good for buying FTSE shares. But the problem for me right now is I’m already fully invested with no spare cash.

However, things can sometimes change fast. Maybe I’ll sell a stock for whatever reason. Or perhaps my earnings will accumulate sufficiently to commit to another stock position. And there’s always an outside chance of inheriting money from some great uncle I never knew I had! But that last one’s unlikely.

Nevertheless, my watchlist is active and up-to-date. And as soon as spare funds arrive I’ll dig in with deeper research with a view to buying stocks to hold long term.

Recovery potential

For example, I reckon Dr Martens (LSE: DOCS) has recovery potential. The well-known boot maker is experiencing problems with a new distribution centre in Los Angeles. And on top of that, sales in America have been lower than the directors expected.

But this one isn’t for widows and orphans. In its short life on the stock market, the company has revealed a nasty habit for spouting out profit warnings. And at prices near 146p, the stock has plunged by almost 70% in a year.

Nevertheless, I’m optimistic the firm can sort out its logistical problems. And I’m hopeful the strength of the brand can translate into rising sales and profits down the road. 

If my deeper research encourages me, I’d be inclined to dip my toe in the water and buy a few shares. But perhaps I’d begin with a small position and increase it if I gain confidence in the ability of the business to turn itself around.

Strong dividend growth

But I also like the look of Sirius Real Estate (LSE: SRE). The company operates business parks providing conventional space and flexible workspace in Germany. And it also has light industrial, workshop, studio, and out-of-town office units in the UK.

A year ago, the share price stood near 126p and today it’s around 85p, representing a 32% drop. And now the price-to-book value is about 0.94 suggesting fair value.

But, for me, the attraction here is the dividend growth story. Since the trading year to March 2017, the company hasn’t missed a beat with its dividend. And it’s raised it every year since. 

Looking ahead, City analysts expect the shareholder payment to increase by just over 13% for the current year to March 2023. And by 10% for the year to March 2024. Meanwhile, set against those predictions, the forward-looking yield is just below 6%.

If the firm hits those dividend expectations, I’d interpret the situation as underlining confidence in the outlook from the directors. But it’s possible for a general deterioration in the economies of the UK and Germany to derail forecasts. So there are risks as well as positive potential with this stock too.

But I’m watching both these FTSE shares closely. And I’ll be ready to pounce when the time comes.

The post 2 FTSE shares I’m poised to pounce on appeared first on The Motley Fool UK.