Most people consider property to be a good source of passive income, but few have the spare cash required to cover the deposit, mortgage payments and other costs needed to get that particular dream off the ground.
That is where REITs (real estate investment trusts) come in, allowing small-fry investors to buy a slice of a property empire and harvest a portion of the rental payments that accrue.
There are REITs covering a wide range of sectors, including farmland, commercial shopping centres and warehousing.
My goal is to invest £1,000 a year and get double that amount in passive income over 30 years.
Primary Health Properties
I’m particularly attracted to Primary Health Properties (LSE:PHP), as the UK’s healthcare needs are bound to keep growing over the decades as the population continues to grow and age.
PHP boasts a portfolio of 523 healthcare facilities, which are mostly privately run GP surgeries. They also let out to NHS organisations, HSE in Ireland, pharmacies and dentists.
In short, this is not the kind of sector where rent defaults are likely, meaning my money should be in safe hands.
26 consecutive years of dividend growth!
Every year since the late 1990s, PHP has rewarded its shareholders with a bigger and bigger dividend payout.
Even through such turbulent periods as the dot-com crash, the Great Recession and the Covid-19 crisis, PHP delivered for its investors.
Of course, major unforeseen disruptions in UK health policy could upset that impressive 26-year streak in year-on-year dividend growth – for example, if a radical left-wing government decided to nationalise PHP’s holdings.
Still, outside of that disaster scenario, I am confident PHP will pay growing dividends come rain or shine.
Aiming to double my money with PHP
PHP paid a dividend of 4.6p per share in 2012, compared with 6.2p in 2021. Each year over that period, shareholders saw the dividend grow by 3.3% on average.
Let’s assume that dividend growth continues over the next 30 years at that same rate, meaning by the year 2052 the dividend per share reaches 17p.
If I bought £1,000 of PHP shares every year from 2023 until 2052 at today’s prices and reinvested the dividends, by the end of that period I would have racked up £72,000.
That means, along with the principal of £30,000 invested, I would have generated a cool £42,000 in passive income – equal to over £116 a month hitting my bank account.
Given one report suggests the average Brit spends more than £1,000 a year on coffee shop visits, cutting back on luxuries here and there so I can instead put my money to work for me in a rock-solid dividend stock like PHP should be a no-brainer.