REIT investing: 2 top dividend stocks I’m looking to buy right now!

These UK dividend stocks are tipped to pay market-beating dividends over the next financial year. This is why I’d add them to my own shares portfolio today.

| 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.

Businesswoman calculating finances in an 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’m searching for the best dividend stocks to buy this summer. And the following real estate investment trusts (REITs) have caught my eye with their FTSE 100-beating dividend yields.

Here’s why I’ll be looking to buy them when I have spare cash to invest.

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.

The PRS REIT

Favourable conditions in residential rental markets make The PRS REIT (LSE:PRSR) a top buy for dividend income. The yield here sits at an attractive 5% for 2023.

Rents in the UK are soaring as the homes supply worsens. Tenant costs have risen by double-digit percentages for 15 straight months, according to Zoopla. A steady decline in buy-to-let investors, coupled with falling housebuilding activity means that this shortfall looks set to continue.

Excluding the pandemic, residential property construction slumped at its sharpest rate in more than 10 years in June, latest PMI data showed. Weak homebuyer demand means that build rates could weaken still further in the months ahead.

PRS REIT is building its own property portfolio to capitalise on this landscape. It will have 5,600 homes on its books once its current delivery programme finishes, up from around 5,000 today. Encouragingly the company is focused on the family home segment of the rental market. Rent rises are especially high in this part of the sector.

Under REIT rules the FTSE 250 business must pay at least 90% of annual rental profits out in dividends. This explains why it offers that market-beating dividend yield.

The property stock also offers solid value in terms of earnings. I think a price-to-earnings (P/E) ratio of 18.5 times is quite attractive, even when one factors in the pressure created by rising build costs.

Unite Group

Dividends at student accommodation provider Unite Group (LSE:UTG) have risen strongly in recent years. It’s a trend analysts expect to continue, resulting in a healthy 4% dividend yield for the current 12-month period.

Okay, changes to government policy on higher education funding could damage earnings here. Yet the profits outlook remains hugely encouraging right now. Student numbers are tipped to soar over the next decade, driven by a rising number of people from overseas. So accommodation demand is tipped to outstrip supply, pushing rents steadily higher.

Market dynamics are already favourable for Unite. Latest financials in April showed that 90% of its rooms are already booked for the 2023/24 financial year. It also expects to enjoy rent growth of between 6% and 7% year on year.

As a consequence City brokers expect earnings at the FTSE 100 firm to rise by low-single-digit percentages over the next few years, leading to steady dividend growth over the period.

Recent price falls leave Unite shares trading on a forward P/E ratio of 19.1 times. I think this represents decent value given the company’s excellent defensive qualities. Studies show that university enrolment actually ticks higher during recessions.

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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

Red briefcase with the words Budget HM Treasury embossed in gold
Investing Articles

Could the new UK budget spell growth for these 6 FTSE stocks? I think so!

Mark David Hartley considers six UK stocks that could enjoy growth off the back of new measures announced in the…

Read more »

Investing Articles

With a 6.6% yield, is now the right time to add this income stock to my ISA?

Our writer’s looking to boost his Stocks and Shares ISA. With this in mind, he’s debating whether to buy a…

Read more »

Dividend Shares

This blue-chip FTSE stock just fell 12.5% in a day. Is it time to consider buying?

Smith & Nephew is a well-known, blue-chip FTSE stock with a decent dividend yield. And its share price just dropped…

Read more »

Investing Articles

At 72p, the Vodafone share price looks to be at least 33% undervalued to me

Our writer looks at a number of valuation measures to determine whether the Vodafone share price reflects the fair value…

Read more »

Investing Articles

Why I’ve just sold two of the largest investments in my Stocks and Shares ISA

Stephen Wright has been making room for a new addition to his Stocks and Shares ISA. What is it and…

Read more »

Investing Articles

2 UK shares I’m avoiding like the plague in today’s stock market

Stephen Wright is a big fan of UK shares. But both the FTSE 100 and the FTSE 250 contain companies…

Read more »

Investing Articles

At 538p, is the Rolls-Royce share price really that expensive?

The Rolls-Royce share price has continued its incredible post-pandemic rally causing many to ask whether the stock’s overvalued. Our writer…

Read more »

Investing Articles

With yields over 8.8%, which of the FTSE 100’s top 5 passive income stocks do I think is the best?

These five passive income stocks are all yielding more than 8.8%. Our writer considers which of them (if any) would…

Read more »