I think real estate investment trusts (REITs) are great stocks to buy for passive income. It’s why I already own Target Healthcare and Primary Health Properties in my portfolio. Such businesses are required to pay out at least 90% of annual profits in the form of dividends.
I don’t have bottomless reserves of cash. But here are three more of these property stocks I’m looking to buy if I have spare money to invest.
Residential Secure Income
Should you invest £1,000 in Big Yellow Group Plc 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 Big Yellow Group Plc made the list?
I think Residential Secure Income (LSE: RESI) could be a perfect pick for these uncertain times. As the name suggests, this REIT specialises in renting out residential accommodation. Having a roof over our heads is one of life’s necessities and so income here remains stable at all points of the economic cycle.
I’d also buy the UK share because private rents in the UK are booming. Estate agent Hamptons says that tenants in England and Wales spent a record £71.5bn on rent in 2022, driven in part by rising rental costs. I expect this trend to continue too as Britain’s property shortage drags on.
Today, Residential Secure Income carries a healthy 5.6% dividend yield. I’d buy it even though high construction costs may remain a big problem in 2023.
Empiric Student Property
Student accommodation provider Empiric Student Property (LSE: ESP) offers excellent all-round value right now. It carries a 4% dividend yield for 2023 and trades on a price-to-earnings growth (PEG) ratio of 0.6. Any reading below 1 shows that a stock is undervalued.
The UK is also suffering from a shortage of quality student rental property. A weak development pipeline — allied with predictions of growing student numbers — suggests the problem will get worse in the years ahead too. So rents at Empiric should keep growing strongly.
Changes to immigration policy affecting foreign students could dent the firm’s future earnings. But right now, the business looks set for strong long-term profits growth.
Big Yellow Group
Self-storage specialists like Big Yellow Group (LSE: BYG) aren’t immune to tough economic conditions. Earnings could suffer if consumers scale back spending on extra space. Demand from small online retailers for stock storage might also dip if shoppers tighten their belts.
But as a long-term investor, I’m still tempted to buy this REIT. This is because Britain’s self-storage market has plenty of room for growth over the next decade, at least. Population growth, smaller living spaces, and the rise of e-commerce will all drive need for additional storage space.
Big Yellow is rapidly expanding to make the most of this opportunity too. It added an extra 191,000 sq ft of space to its portfolio between April and September. It also has 11 sites in development with a total capacity of around 900,000 sq ft.
Today, the FTSE 250 firm sports a 3.8% dividend yield, well above the 3% index average. I expect it to deliver market-beating dividends long into the future.
