With higher interest rates decimating property values, investor sentiment in this sector has similarly tanked. The result has been many REITs getting aggressively sold off to the point that many are now trading below their net asset values (NAV).

But as experienced investors know, unpopularity often breeds opportunity. And after falling by almost 50% in the last five years, while still delivering dividend growth since 2021, Workspace Group (LSE:WKP) shares now offer a tasty-looking 7.2% yield.

So is this a passive income goldmine?

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.

Why are the shares down 50%?

As a quick introduction, Workspace owns, manages, and leases flexible office spaces to small- and medium-sized businesses (SMBs) across London. However, rather than locking in decade-long contracts, the group specialises in more short-term flexible leases, typically spanning between six and 36 months.

While this does expose Workspace to a higher churn, it also means management’s able to adjust prices far more rapidly, remaining continuously competitive while simultaneously lowering the financial barriers to onboard new tenants.

The only trouble is, demand for office space has been pretty weak over the last five years.

With the rise of remote working alongside tax hikes for SMBs, attracting new tenants has been tough. And with £864m of debts & equivalents on the balance sheet, the company’s been forced to start selling off underperforming real estate assets in a lacklustre pricing environment.

Pairing this with general weak sentiment within the REIT space, it isn’t surprising to see the stock get hit. Yet, following a recent trading update, 2026 could be the year that all starts to change.

An incoming turnaround?

In response to the tough market conditions, management deployed a new strategy called ‘Fix, Accelerate, Scale’.

The goal is to deliver operational improvements and secure novel partnerships to drive higher occupancy while simultaneously optimising its real estate portfolio, upgrading outperforming assets and disposing of £200m worth of underperforming ones.

It’s still relatively early days, but to management’s credit, the strategy seems to be working.

• The firm’s loan-to-value ratio is slowly ticking down as management uses disposals to tackle leverage.
• Like-for-like occupancy is now back on the rise, expanding 0.9% to 81.2% in its most recent quarter.
• Enquiry-to-lettings conversion has climbed from 16% to 19% between September and December 2025.

These are all early signals that a cyclical recovery could now be underway. So is this a rare buying opportunity hiding in plain sight?

Where’s the risk?

Seeing recovery signals is obviously encouraging. However, Workspace isn’t out of the woods just yet.

Despite occupancy now ticking back up, net rental income’s actually still falling due to a weaker price environment. This downward pressure on cash flow, alongside debt interest expenses, means that the group’s trading profits are actually lower than the amount of money being paid out in dividends.

In other words, today’s impressive dividend yield is vulnerable to a potential cut if market conditions don’t improve in the coming quarters.

There’s still a lot of macroeconomic uncertainty surrounding this REIT. But with shares trading at a 44% discount to NAV, that might be a risk worth considering.

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Here’s how an investor can make a passive income with just £5 a day.

Points to remember

Given the costs of buying a stock via a broker or investment platform, buying a new stock with £5 each day doesn’t make sense. Rather, I think it’s better to put the £5 away each day in an ISA or other account. At the end of each month, the accumulated money can then be used to purchase a stock. Typically, this would mean using £150 saved to buy it. This means that the fee is much more manageable and makes it worthwhile.

If an investor focused on buying dividend stocks, they could target an average dividend yield of 6%-8%. At the moment, there are 43 different companies in the FTSE 100 and FTSE 250 with a yield above 6%, so there’s plenty to choose from.

If we assume the investor continued putting the £5 away each day and made it a habit, things could grow over time. For example, with an average portfolio yield of 7%, after seven years the pot could be worth £16.4k, having generated £1,042 in dividends that year. Up to that point, the dividends would have been reinvested. This helps to compound gains faster.

Of course, dividends aren’t guaranteed. Companies can have good years and bad years, and during bad years, there’s the risk that the dividend gets cut. In that case, reaching a four-figure passive income could take longer.

A high-yield property option

Another key part of the strategy is picking the right companies. One to consider is Workspace Group (LSE:WKP). The real estate investment trust (REIT) owns and manages flexible office space and business premises.

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.

The core business model revolves around collecting rental income from the tenants. However, it also aims to benefit from the property values increasing by refurbishing and redeveloping assets.

Over the past year, the stock’s down 18%, which might worry some investors. This has mainly been due to falling office values across London, which have been under pressure due to weaker demand.

Even though this remains a risk going forward, I think we will see businesses continuing to push for a return to office working for many employees in the coming years. Therefore, the move lower in the stock, which has acted to bump up the dividend yield, could be a dip to consider buying.

As for the dividend, it’s remained steady despite the portfolio’s decline in value. The latest half-year results showed underlying net rental income of £58.6m, the same as a year ago. This gives me confidence that the payments can be continued.

Overall, I think it’s a stock to be considered as part of the broader aim of building up a passive income from the stock market.

The post A £5-a-day stock market plan for a 4-figure second income stream appeared first on The Motley Fool UK.

The key points

I’ve come across Workspace Group (LSE:WKP), a FTSE 250 stock. The real estate investment trust (REIT) is focused on commercial property for small and medium-sized enterprises, mainly in Greater London.

The stock is down 40% over the past year with a dividend yield of 7.31%. Part of the reason for the share price fall comes from a decline in occupancy. Back in June, it reported that occupancy slid from 88% to 83% year on year. Many tenants are downsizing or uncertain, often driven by hybrid working models.

Further, with interest rates remaining higher than expected, it has put pressure on property valuations. The higher cost of borrowing makes it harder for potential buyers to support the market, acting to reduce the value of the properties in the portfolio of Workspace.

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.

Income potential is still strong

The REIT typically pays two dividends a year. Over the past year, this has been 9.40p and 19p, totalling 28.4p. When using the current share price of 388p, we derive the yield of 7.31%.

It’s important to note that despite the business struggles, the dividend cover is 1.2. This means the current earnings per share fully cover the dividend payments, with an excess when the number is above one. Therefore, I don’t see any immediate pressure of it being cut.

Looking forward, analysts expect the dividend to rise for a total in 2026 of 29.15p, with 29.60p in 2027. In theory, if the share price remained the same, this could translate to a yield of 7.62%. This would be over double the current index yield for the FTSE 250.

Of course, these expectations are subjective. A lot can change in the coming couple of years that could either decrease or increase the dividend per share.

Cautiously optimistic

If the dividend is stable, the main risk going forward is a further share price fall. This could wipe out the benfits of the income, and could be seen if commercial property continues in its rut. However, I have a slightly contrarian view that more companies will be pushing for people to come back to an office, even smaller businesses. If the UK continues to have unemployment rising, those who have a job will be keener to show their face and prove their worth.

As a result, I think the company could have weathered the worst of the storm here. Don’t get me wrong, this is a high-risk stock for consideration. It’s not suitable for everyone. But I’m seriosuly thinking about allocating a small amount of money to the stock for the income benefits.

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The 2024 year was a tough one across the sector. PageGroup reported “worsening sentiment and reduced confidence in Europe during the second half of the year“. But the company still lifted its dividend by 4.5%, “reflecting confidence in our strategy“. The dividend wasn’t covered by earnings per share (EPS). But if the 63% EPS drop really is a one-off, that might not be a problem.

What might be a problem however, is the 2025 outlook being “uncertain due to increasingly unpredictable economic environment“. In a Q1 update in April, PageGroup said “the slower end to Q4 2024 continued into Q1 2025“.

I think I’ll wait until I see how things look at the 2025 halfway stage. But if the dividend holds, I think it’ll be one to consider as a long-term buy.

Overlooked cash cow?

A 34% share price fall over the past five years has pushed the forecast dividend yield at MONY Group (LSE: MONY) up to 6.3%. That might not be so great if earnings were falling at the same time. But EPS has actually been growing in the past few years, and analysts expect the trend to continue.

Forecasts suggest a price-to-earnings (P/E) ratio of 12.5, dropping to 10.5 by 2027. So I think what we’re looking at is a justified correction to a stock price that had been getting a bit overheated.

Predicted dividend cover looks maybe a bit thin in the next few years, at around 1.3 times. And that has to put the dividend outlook under some pressure. Still, at FT results time for 2024, the company, formerly known as Moneysupermarket.com, announced a £30m share buyback reflecting its “strong cash generation and robust financial position“.

The business faces intense competition. And we’re still under the collective hammer of high interest rates and economic turmoil. But I think long-term dividend investors could do well to think about it.

Business property

I’m turning to real estate investment trusts (REITs) now. And the 40% share price fall at Workspace Group (LSE: WKP) catches my eye. The company lets office space across London. So I can see why the past few high-inflation years have taken their toll.

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.

At the moment, interest rates aren’t helping. Especially not with the company reporting net debt of £847m at the end of the third quarter in December. But there seems to be no liquidity problem, with £233m in cash and undrawn facilities on the books.

I think the company could be in a strong position when interest rates come down, hopefully on two fronts. It should lower future borrowing costs, and give boosts to clients’ businesses.

Ongoing economic uncertainty could be the biggest drawback here. We should have full-year results on 5 June, and I fear we could still see some strong headwinds. But investors with confidence in the expected 6.6% dividend yield might take a closer look at buying in advance.

The post 3 cheap FTSE 250 stocks with big dividends to consider buying right now appeared first on The Motley Fool UK.

Here, I’m going to highlight two dividend payers I think could be well suited to those aged over 50. Both offer attractive yields today but also have the potential to generate decent capital gains over the long run.

A London-based property company

First up we have Workspace Group (LSE: WKP). It’s a real estate investment trust (REIT) that offers flexible office space solutions across London.

The dividend here’s attractive. For the current financial year (ending 31 March), the REIT’s expected to pay out 29.5p in income. That equates to a yield of around 4.5%. Given that UK interest rates are falling, that could be significantly higher than the rates cash savings accounts are offering in 12 months’ time.

Looking beyond the yield, there are several things I like about this stock. One is that it stands to benefit from lower interest rates. In the years ahead, lower rates should reduce the REIT’s interest expense (it had net debt of £828m at the end of March) and boost profitability.

Another is that it looks well positioned to benefit from the shift back to the office. Today, companies across all industries are making moves to get employees back into the office and this could increase demand for office space.

It’s worth noting that management sounded pretty confident about the outlook in July: “Looking ahead, our scalable operating platform puts us in a strong position to continue to deliver near and long-term income and dividend growth, and we move into the second quarter of the year with positive momentum,” said CEO Graham Clemett.

Of course, economic weakness is a potential risk here. This could temporarily reduce demand for office space.

In the long run however, I think this REIT should do well on the back of London’s thriving start-up scene.

A blue-chip Footsie company

The second stock I want to highlight is Tesco (LSE: TSCO). It’s the largest supermarket operator in the UK with a near-30% market share.

The yield here isn’t super-high today. Looking at the dividend forecast for the financial year ending 28 February (12.9p per share), it’s about 3.5%.

But analysts expect a healthy level of dividend growth in the years ahead. Next financial year, the payout’s expected to climb to 14p per share, which pushes the yield to 3.8%. It’s worth noting that Tesco’s dividend coverage (the ratio of earnings to dividends) is high. So there’s plenty of scope for future dividend increases.

Now, Tesco operates in a competitive industry. In the years ahead, it’s likely to face intense competition from rivals such as M&S, Asda, and Aldi, so its market share could be at risk.

One thing that could give it an edge however, is its Clubcard scheme. Today, the company has over 20m Clubcard members. This means that it’s able to collect a ton of data from its customers. The more data it can collect, the better positioned it will be to prosper going forward.

Overall, I think the stock offers a nice mix of growth potential and defence. That’s why I see it as a good stock for those over 50 to consider.

The post Over 50? Here are 2 dividend stocks to consider buying for passive income appeared first on The Motley Fool UK.

Here, I’m going to highlight three REITs that have attractive yields today. Investing in these companies could generate quite a bit of 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.

A safer REIT

First up is Primary Health Properties (LSE: PHP). It’s a real estate company that invests in healthcare facilities across the UK. Currently, it has over 500 properties in its portfolio.

There’s a lot to like about this company from an investment perspective, to my mind. Not only does it look set to benefit from the UK’s ageing population in the years ahead (older people typically require more healthcare services), but it also receives a lot of its rent from the UK government. This combination makes it safer than a lot of other REITs on the London Stock Exchange, in my view.

As for the income potential here, it’s quite healthy. Currently, analysts expect the company to payout 6.71p per share for 2023. This means that a £2k investment today could generate annual income of around £130.

Blue-chip tenants

Next we have Tritax Big Box (LSE: BBOX). This is a real estate company with a focus on large, e-commerce warehouses.

There are two main reasons I like this REIT. One is that the company is well-placed to benefit from the growth of the online shopping industry. In the years ahead, UK e-commerce sales are predicted to climb significantly.

The other is that it has blue-chip tenants such as Amazon, Tesco and M&S. This means its rental income is unlikely to suddenly evaporate.

Zooming in on the dividend, Tritax is expected to pay out 7.2p per share to shareholders for 2023. So a £2k investment could potentially deliver annual income of around £100.

Improving outlook

Finally, we have Workspace (LSE: WKP). It offers flexible office space solutions across London.

This company had a tough time during Covid. That’s because with everyone working from home, demand for office space plummeted.

The outlook is improving now though. Today, companies across all industries are bringing employees back to the office. This should benefit Workspace, which can provide flexibility for businesses with changing needs.

This isn’t just a short-term story however. In the long run, the company looks well-placed to benefit from London’s thriving start-up scene.

Turning to the dividend, analysts currently expect Workspace to pay out 24.7p per share in dividends for 2023. That equates to annual income of around £94 on a £2k investment.

Diversification is important

It’s worth pointing out that REITs have their risks. One is their exposure to interest rate movements. Most REITs have significant loans that need servicing. This explains why a lot of them have seen their share prices fall recently. Higher interest rates could eat into profits, and potentially reduce future dividends.

Given the risks, REITs are best owned as part of a balanced and diversified portfolio.

The post Investing in these 3 super REITs could generate a second income appeared first on The Motley Fool UK.

Here, I’m going to highlight two FTSE 250 dividend stocks I like the look of right now. I’d be happy to buy these stocks for my own portfolio today.

FTSE 250 dividend shares

The first stock I want to discuss is Workspace Group (LSE: WKP). It’s a real estate investment trust (REIT) that offers flexible office space solutions in London. Currently, it has over 60 workspaces and serves over 3,000 small businesses. The yield on the stock is around 2.5%.

There are two reasons I’m bullish on Workspace. The first is that the company is well positioned for the new ‘hybrid’ work environment. I’m convinced that the pandemic has changed the way we work forever. In my view, we’re likely to see a lot less mandatory nine-to-five working going forward, and a lot more flexibility in terms of hours. The upshot? Companies are likely to seek out flexible office space.

The second reason I’m bullish is that the London start-up scene is booming right now. According to Tech Nation, there were over 100,000 new businesses launched in the Capital last year. As start-ups get bigger, they require office space. I think Workspace is well placed to benefit from the London start-up boom.

There are risks to my investment thesis, of course. If Covid-19 comes back with a vengeance, and we’re all forced to work from home again, Workspace is likely to struggle. Meanwhile, if we see a big recession, Workspace may not be able to collect rent from its tenants. It’s worth noting that the stock has a higher valuation (a forward-looking P/E ratio of 33), so there’s not a lot of room for error.

Overall however, I think the long-term risk/reward proposition here is attractive.

Growth and dividends

Another FTSE 250 dividend stock I’d buy today is Computacenter (LSE: CCC). It’s a leading provider of IT solutions (cloud computing, cybersecurity, remote work software and more) to businesses and government organisations. The prospective dividend yield on offer here is about 2.1%.

Computercenter is well positioned to generate solid growth in the years ahead, in my opinion. That’s because all over the world, companies are undergoing digital transformation and enhancing business processes with technology. Computacenter is essentially a ‘picks-and-shovels’ business for this trend. It provides companies with the tools they need to become fully digital.

But a risk to monitor here is the current semiconductor shortage that’s impacting the supply of electronic products. In the near term, the chip shortage could cause supply chain issues for CCC and hit profits.

I think this risk is factored in to the share price, however. Currently, the stock sports a forward-looking P/E ratio of just 18, which isn’t high at all, to my mind. It’s worth noting that last month, analysts at UBS upgraded the stock to ‘buy’ and raised their price target from 2,520p to 3,290p. That’s nearly 20% higher than the current share price.

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Workspace Group is a real estate investment trust that owns and manages a large portfolio of properties in London. Like many large real estate companies, Workspace was hit hard by fears of the Covid-19 pandemic. It didn’t help that most Workspace properties are commercial real estate such as office buildings. During lockdown, people couldn’t come into their offices and started working from home. Many businesses began to wonder that if their employees could work just as effectively at home, why should they fork out thousands of pounds a month on pointless office space? This seemed like a huge long-term problem for Workspace Group, and investors began to panic.

So why has the price rallied?

Once lockdown measures began to lift, many people wanted to go back to work. It turns out that working from home can be challenging for employers and distracting for employees. Suddenly businesses need office space again and Workspace Group could provide it; in fact, Workspace has said that customer demand is now running at pre-Covid levels. This resurgence in property demand can be seen in commercial real estate prices, with most estimates on this inflation running between 10 and 20% for the year. Of course Workspace took substantial losses in 2020, but as things started turning in its favour, so did the share price. It would make sense, therefore, that much of the recent price rally can be explained by investors pricing in a better future for the company and perhaps attempting to gain exposure to a booming real estate market.      

Will the Workspace Group share price continue to rise?

It should always be acknowledged, when it comes to investing, that past performance does not indicate future results. All this means is that, just because the share price has performed well so far this year, it doesn’t mean it will continue to do so. That being said, however, there’s a lot of momentum behind the share price right now, and an accommodating economic climate for Workspace Group means the rally could very well continue. However, it appears that the increased demand for real estate may already be starting to dwindle. Not to mention that, after such a strong couple of months, I wouldn’t be surprised if the stock has a few pullbacks as investors start to take profits. Regardless, I think this is a company for me to keep an eye on, especially if earnings begin to improve and demand for commercial real estate continues to grow. 

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Generating passive income with real-estate

Workspace Group (LSE:WKP) is a real estate investment trust that owns 58 properties throughout London. It rents these out to businesses as flexible office space which, as previously stated, has unfortunately remained predominantly empty for months.

Covid-19 has not been kind to many office space providers, and Workspace Group is no exception. Occupancy rates throughout 2020 fell from 93% to 82%. But the stock was able to ensure rent collection rates stayed above 90%, which I thought was quite impressive. However, this figure is somewhat inflated when considering nearly 80% of its customers were given a temporary 50% discount on their leases. As a result, net rental income dropped by almost 40% at the end of 2020.

Needless to say, these figures aren’t great, so why am I considering the stock as a source of passive income?

A quickly recovering dividend stock

A closer inspection of customer activity reveals a promising trend. The adverse effects of Covid-19 on office rentals appear to be evaporating.

The level of customer enquiries, office viewings, and, most importantly, letting agreements has been steadily increasing since March 2020. Before the pandemic struck, the average number of lettings per month sat around 120. In March, that figure plummeted into the low 40s. But in the latest quarterly statement, average lettings between October and December 2020 were back up to 109.

To me, this trend indicates the transition back to office working has already begun. Yet, the share price of Workspace Group remains well below its pre-pandemic levels, even though operational performance appears to be back on track. Simply put, the dividend stock looks too cheap in my eyes.

Generating passive income with dividend stocks can be risky

While real-estate is often thought of as a ‘safe’ investment, it still has a degree of risk. Just look at what happened in 2008. Property values change, and it can have a significant impact on this business. Let me explain.

Workspace Group uses debt facilities to acquire new properties for its rental portfolio. However, a fundamental restriction in these loans is a covenant surrounding the stock’s loan-to-value ratio. If the values of its properties decrease, the ratio increases and subsequently restricts the stock’s ability to acquire more loans.

Another risk worth considering is the level of demand for office space. As Covid-19 perfectly demonstrated, the success of Workspace Group is entirely dependent on this. While I believe that many people will return to an office work environment, I also think that many businesses will continue with a work-from-home scheme even after the pandemic ends. As a result, the value of office space could decline, and with it, rental income.

The bottom line

Personally, while these risks are significant, I think Workspace Group could enjoy a nice turnaround in 2021. And pairing that with a 4.7% dividend yield makes it a stock I’d want to have in my passive income portfolio.

The post 1 cheap dividend stock I’d buy to generate passive income appeared first on The Motley Fool UK.

Cheap UK shares to buy 

Shares in Premier Foods (LSE: PFD) slumped in the stock market crash. However, the stock has recovered following the company’s upbeat statements over the past few months. 

Sales at the food company and owner of the Mr Kipling brand jumped during the lockdown. City analysts are now forecasting a 64% increase in earnings this year. If Premier hits this target, it will be one of the few UK shares to have benefited from lockdown.

The extra cash will also help the company reduce its debt and pension obligations. This could be a big positive for the business in the long run.

As such, I think it could be worth buying Premier Foods as part of a diversified portfolio. The stock is currently dealing at a forward price-to-earnings (P/E) multiple of 9 compared to its long-term average, which sits in the mid-teens.

As the company builds on its success of the past few months, I think investor sentiment towards the business could improve dramatically. 

Stock market crash bargain 

Workspace Group (LSE: WKP) is one of the many casualties of the coronavirus crisis. The operation, which specialises in flexible workspaces and property, has seen the demand for its offices slump. 

As the world returns to work, demand should increase. Demand for flexible office space may also outpace previous levels because employers seem to want more flexibility in the new normal. This may benefit Workspace more than many other businesses in its sector. 

As well as this potential, the stock appears to offer a wide margin of safety at current levels. It is currently dealing at a price-to-book (P/B) value of 0.5.

These numbers suggest the stock could jump by as much as 100% from current levels as the economic recovery begins. Only a handful of other cheap UK shares offer the same kind of potential.

Therefore, I think it could be worth adding Workspace to a basket of stock market crash bargains. 

McCarthy & Stone

McCarthy & Stone (LSE: MCS) has suffered from the same pressures as the two cheap UK shares profiled above. 

However, I also think this stock market crash bargain has a bright future. The company, which specialises in developing properties for older people, is one of the biggest in its sector. This gives it impressive economies of scale. In addition, the UK’s population is ageing rapidly, and the demand for specially adapted properties is only increasing. 

This suggests that while investor sentiment towards the business may be depressed today, it should benefit from the above tailwinds over the long term. I think these tailwinds can help the company overcome any short-term fundamental issues and stage a strong recovery in the years ahead. 

I think there’s also a chance that the demand for the firm’s building may exceed pre-Covid levels in the years ahead as the demand for specialist housing grows. 

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