Real estate investment trusts (REITs) can be effective ways for investors to build a healthy passive income. Property stocks in general can be reliable sources of dividends. The regular rental incomes they receive can give them the power to provide stable income to their shareholders.
However, I like REITs specifically because they are legally required to pay 90% of annual profits out in the form of dividends. Here are four property-focused investment trusts I’d like to buy today.
Highcroft Investments
I think Highcroft Investments could be a great source of long-term passive income. It is a company with high exposure to the warehouse and retail park sectors. Collectively, these areas accounted for three-quarters of its portfolio at the end of 2021.
Demand for warehouse assets is growing strongly as e-commerce ramps up. And retail parks are becoming increasingly popular due to changing shopper habits in the post-coronavirus era.
My main concern for Highcroft is its exposure to office properties. The use of such spaces is in decline as flexible working practices take over.
Civitas Social Housing
I like the peace of mind Civitas Social Housing could offer me as an investor. The rents it receives are paid by local authorities, meaning revenues remain stable at all points of the economic cycle.
I also like this REIT because it specialises in providing homes for people with special care requirements. This is a sector that’s growing strongly because of factors like rising life expectancy and a declining number of long-stay hospitals are care homes.
Changing NHS policy could threaten future earnings growth. But the Health and Care Act passed earlier this year has actually boosted the Civitas outlook, for now. This new legislation further links healthcare and social care services into integrated care systems.
Unite Group
The quality of British universities makes the UK popular with students across the globe. This is something that investors can profit from by investing in FTSE 100-quoted Unite Group.
Unite provides places for 75,000 students to stay across 29 university towns and cities. And because of a growing supply and demand gap, rents are rising strongly. The firm enjoyed rental growth of 3.5% for the 2022/23 academic year. This is tipped to hit between 4.5% and 5% for next year too.
Changes to British immigration policy could reduce the number of foreign students in the UK. And this could have an obvious effect on demand for Unite’s services. But right now, the outlook here remains bright.
Safestore Holdings
Self-storage companies like Safestore are growing strongly, thanks to a strong housing market and expanding e-commerce sector.
I think both these categories could cool as interest rates rise and consumer confidence falls. But from a long-term perspective, the self-storage property sector still has huge investment potential. Analysts at Proficient Market Insights think the industry will grow at an annualised rate of 7.5% between now and 2027.
Safestore has around 130 units in the UK. And it is rapidly building its property pipeline to capitalise on growing demand.