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.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

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.

This AI stock is becoming a digital juggernaut in a £ 12.5 billion market!

🤖 Curious about the next big player in AI? 🤖

Our leading industry analysts have uncovered a trailblazing content platform that's revolutionising the industry with its unparalleled generative AI technology, setting new standards in creativity and efficiency.

Care for a sneak peek?

Trusted by global giants like Amazon, Disney, and Netflix, this innovative company is not just transforming digital media with AI-generated 3D content but is also capturing a significant share of a £12.7 billion market!

With a remarkable 62% gross margin, indicating exceptional profitability and operational efficiency, this company's growth trajectory positions it as a must-watch for savvy investors.

Best of all, we're offering exclusive access to the name of this game-changing stock, absolutely free!

Discover your free AI stock pick

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

Dividend Shares

£500 to invest this payday? Here are 2 great passive income ideas to consider

It has never been easier to generate passive income from the stock market. Here are two ideas for those with…

Read more »

Investing Articles

ChatGPT thinks these are the best stocks to buy for passive income. There’s 1 big problem

Is ChatGPT a useful tool for investors hunting for passive income from the stock market? Based on his little experiment,…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

5 reasons I won’t buy Tesla shares today!

Tesla shares shrugged off Wednesday's underwhelming results as they continue to power upwards. But a sceptical Harvey Jones says he…

Read more »

Investing Articles

1 AI-powered growth share I just had to buy for my Stocks and Shares ISA!

Our writer reveals an exciting new company in his Stocks and Shares ISA portfolio that he thinks is poised for…

Read more »

Investing Articles

Why did this forgotten FTSE income share suddenly jump 21% in January?

Spirax Group is a top FTSE 100 income share, having hiked dividends for more than 50 years. It's made a…

Read more »

Investing Articles

I think now is the perfect time to consider buying high-yield FTSE dividend shares like Aviva

Harvey Jones has been loading up on FTSE 100 dividend shares over the last year or so, waiting for them…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Scottish Mortgage shares jumped almost 15% in January. Time to consider buying?

Harvey Jones was delighted to see Scottish Mortgage shares end January notably higher despite all the fuss about cheap Chinese…

Read more »

Edinburgh Cityscape with fireworks over The Castle and Balmoral Clock Tower
Investing Articles

ISA millionaires love Legal & General shares – and so do I!

Harvey Jones was pleased to learn that Legal & General shares are top of the pops among ISA millionaires. Better…

Read more »