Here’s why I own this REIT for dividends and growth!

Jabran Khan explains why he bought shares in this REIT to boost his passive income stream as the business grows.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Female Doctor In White Coat Having Meeting With Woman Patient In Office

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I currently own shares in real estate investment trust (REIT) Primary Health Properties (LSE:PHP). Here’s why I’m thinking of buying more shares to boost my passive income stream.

Healthcare REIT

As a quick reminder, a REIT is a business designed specifically to yield income from property. It is legally mandated to return 90% of profits to its shareholders in the form of dividends.

Primary Health Properties specialises in the purchase, development, and ownership of healthcare premises throughout the UK and Ireland. An example of a primary healthcare facility is a GP’s surgery.

Should you invest £1,000 in Primary Health Properties right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Primary Health Properties made the list?

See the 6 stocks

So what’s happening with Primary shares currently? As I write, they’re trading for 138p. At this time last year, the stock was trading for 154p, which is a 12% drop over a 12-month period. Macroeconomic headwinds have caused many shares to pull back in recent months, so this is not a concern for me currently.

REITs have risks

The first risk of any dividend stock is the fact that dividends are not guaranteed. They can be cancelled at the discretion of the business at any time. This can be due to dwindling performance or extreme events such as a pandemic. A prime example of this was the Covid-19 pandemic when many firms cancelled dividends to conserve cash.

In regard to Primary specifically, there has been a rise in virtual healthcare options in recent years. Could this offering mean fewer people going and see their GP? There is every chance of this. If this shift were to occur, Primary could experience weakened demand for its properties and operations. This could result in the levels of returns I hope to make being negatively affected.

The bull case and my verdict

Firstly, Primary shares look decent value for money on a price-to-earnings ratio of 14. The general consensus is that a ratio of below 15 represents good value for money.

Next, Primary’s dividend yield stands at an enticing 4.5% as I write. The FTSE 100 average yield is 3%-4%. As REITs are designed to return cash to shareholders, it is not uncommon to see index-beating yields.

So what about performance? After all, performance underpins dividend payments. I do understand that past performance is not a guarantee of the future, however. Looking back, I can see Primary has consistently grown revenue and profit for the past four years. In this time, it has also continued to grow the size of its estate and number of properties.

Finally, I believe Primary has defensive attributes. Healthcare is a staple for all and nearly everyone is registered to a GP surgery here in the UK. Furthermore, resources in the UK are becoming stretched due to a growing and ageing population. This tells me the demand for healthcare services will only grow, meaning a REIT like Primary could benefit.

Overall I’m buoyed by the future of Primary Healthcare Properties. I only see the business growing and in turn, my returns increasing too. Not only will I hold my position, but I would add further shares too to increase my returns.

Pound coins for sale — 31 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jabran Khan owns shares in Primary Health Properties. The Motley Fool UK has recommended Primary Health Properties. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

artificial intelligence investing algorithms
Growth Shares

2 FTSE stocks that could do well with the DeepSeek AI breakthrough

Jon Smith talks through the implications of the latest AI news and flags up some FTSE shares that could benefit…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

This FTSE 250 stock’s worth more than Greggs! How mad is that?

Our writer’s left scratching his head after learning that a loss-making FTSE 250 stock is valued more highly than a…

Read more »

estate agent welcoming a couple to house viewing
Investing Articles

Here’s how an investor could use £20,000 of savings to target £1,289 a month of passive income!

Our writer demonstrates how it’s possible to a generate a healthy level of passive income from a portfolio of FTSE…

Read more »

Investing Articles

2 bargain FTSE 100 shares that I already own!

Our writer takes a look at his own portfolio and identifies two FTSE 100 stocks he thinks offer tremendous value…

Read more »

Older couple walking in park
Investing Articles

With DeepSeek on the scene, should investors ‘go retro’ with their Stocks and Shares ISAs?

The arrival of a new AI model has caused mayhem in the tech sector. Does this mean a more old-fashioned…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£5,000 invested in this penny stock 1 year ago is now worth…

Topps Tiles has had a miserable year. Muhammad Cheema looks at how much would have been lost if an investor…

Read more »

Investing Articles

This passive income plan is boring and unimaginative. That’s why it actually works!

Christopher Ruane explains how he is keeping things simple when it comes to earning passive income streams, using a proven…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

These FTSE 100 stocks could catapult forward as AI gets cheaper

The FTSE 100 isn’t often associated with artificial intelligence. However, as we move towards the next phase of the revolution,…

Read more »