One of my biggest investment aims is to buy UK shares that pay consistent dividends to boost my passive income. This is despite the fact that dividends are never guaranteed.
Let me explain why I bought shares in Primary Health Properties (LSE: PHP), Warehouse REIT (LSE: WHR), and Regional REIT (LSE: RGL).
All three stocks are set up as real estate investment trusts (REITs). They make income from properties and must return 90% of profits to shareholders like me.
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Primary Healthcare Properties
Primary invests in and rents out healthcare properties such as GP’s surgeries. Renting out healthcare provisions to the NHS is extremely smart, if you ask me. This is due to the ageing and rapidly growing population in the UK. Demand for healthcare has never been higher.
In terms of returns, a dividend yield of 6.7% is significantly above the FTSE 100 average of 3.8%.
Continued economic volatility, such as high interest rates, could hurt payouts and growth. The firm has a fair bit of debt to contend with which is costlier to pay down in times of higher rates, like now. Plus, the property market has struggled recently, so acquiring new properties for growth is a tricky proposition right now.
Warehouse REIT
Demand for warehouse and industrial properties has risen in recent years. This is mainly linked to the e-commerce boom and the changing habits of shoppers from brick-and-mortar retail, to online. If this trend continues, as stats show it could, then Warehouse could see returns and performance boosted.
At present, Warehouse REIT offers me a yield of 7.3%, which is very attractive!
Warehouse isn’t the only game in town. With lots of competition and low barriers of entry into the sector, competitors could undercut or financially and operationally outmanoeuvre the business. This could hurt profits, which underpin returns.
Regional REIT
Regional REIT focuses on office space and commercial properties outside the M25 motorway. This diversification is a plus point for me. For example, demand for office space is not the same as prior to the pandemic but demand for industrial space has soared.
Regional’s dividend yield is skewed compared to the two UK shares I’ve noted earlier. A yield of 17% looks inflated as the share price has struggled. This is primarily linked to the macroeconomic volatility of late which has hurt the property market. However, the dividend itself looks well covered by earnings, based on its balance sheet. I’d expect the shares to head upwards once volatility subsides and the yield even out.
Looking at risks, the office building arm of Regional’s assets may come under pressure. The pandemic sped up the home working boom, and now it seems most office jobs can be done remotely or hybrid. In turn, this could reduce the demand for office space, and hurt Regional’s performance and returns.
Overall, I plan on holding on to these three stocks for the long-term – which I’d define as a five- to 10-year period – and expect to receive consistent returns.
