An uncertain outlook for the global economy means that investors may have to work harder to make decent dividend income with UK shares. But there is no reason to panic. There are still many top companies and investment trusts that City analysts think will deliver solid passive income in the near term.
Here are two I’d buy for big dividends today. In fact I think they could deliver exceptional returns for the rest of the decade.
The PRS REIT
Forward dividend yield: 4.8%
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Higher-than-usual construction costs threaten earnings growth at build-to-rent specialist The PRS REIT (LSE:PRSR). But I still expect the business to perform strongly as rents across the country rip higher.
Average asking rents outside London rose by 9.3% in the second quarter to £1,231, according to property website Rightmove. And asking rents for new tenants are now 33% higher than they were before the pandemic as the housing shortage rolls on.
There’s no sign that Britain’s supply and demand imbalance is set to end. In fact there’s a good chance it will continue to worsen in the years ahead. Rising costs mean the exodus of buy-to-let investors looks here to stay. At the same time, new housing starts remain weak.
PRS REIT is already capitalising effectively on this favourable landscape. Like-for-like rent growth picked up to 6.5% in the year to May. This was up from 5.7% in the prior 12-month period.
Buying residential property stocks has an added advantage in tough times like these. This is because demand for accommodation remains stable at all points of the economic cycle. Indeed, PRS REIT’s occupancy stood at 98% as of May. The business also collected 100% of the rents it was due.
Triple Point Energy Transition
Forward dividend yield: 8.1%
Snapping up renewable energy stocks also has huge investment potential as the world moves away from fossil fuels. Triple Point Energy Transition (LSE:TENT) is one such UK share I’m considering buying to hold for the long term.
At current prices it looks especially attractive. As well as carrying that huge dividend yield, the investment trust trades at an attractive discount to the value of its underlying assets. Net asset value sits at 99.5p per share compared with a share price of 70p.
Triple Point invests in a range of assets to capitalise on the growing green economy. It has wide exposure across the energy generation, storage, and distribution sectors, which in turn reduces the risk to investors.
I believe the investment trust is especially attractive in this period of macroeconomic uncertainty and high inflation. Around nine-tenths of the income it makes is locked into to long-term contracts, while 45% of it is linked to retail price inflation (RPI).
Changes to green legislation could affect future earnings growth here. But as things stand today, Triple Point looks like a great stock to hold for the rest of the decade.
