These three REITs have an average dividend yield of 6.7%. I’m considering buying them to boost the passive income from my share portfolio, although I always have to bear in mind that the yields aren’t guaranteed.

The best retail opportunities?

Shopping centres were struggling even before Covid hit the sector. However, out-of-town retail parks and community shops such as mini supermarkets have recovered quicker and now appear to be performing quite well. NewRiver REIT (LSE: NRR) has a £700m property portfolio that’s built around these types of location.

This business isn’t without risk. Debt levels reached uncomfortable levels last year, leading to property sales to fund repayments. NewRiver’s dividend was also cut during the pandemic.

However, I’d argue that NewRiver’s current share price is low enough to reflect these concerns. The stock currently trades at a 30% discount to its book value of 131p and offers a forecast dividend yield of 7.4%. For these reasons, this UK REIT is a stock I’m considering for a passive income.

Healthcare properties with long-term incomes

My next selection is Target Healthcare REIT (LSE: THRL). This £730m business owns a portfolio of 79 care homes across the UK. The average remaining lease on these properties is 28 years, giving Target great long-term visibility of cash flows.

This REIT is continuing to expand too. Target Healthcare spent £173m on new investments during the final quarter of last year, acquiring 18 care homes and a new-build site.

The company’s properties look pretty safe to me. They generally have long leases and inflation-linked rents. The main risk I can see is that some UK care home operators have struggled to make money in recent years. If Target Healthcare’s tenants run into problems, rental rates might fall.

On balance, I’m attracted to Target Healthcare’s long-term business model. The stock also offers a forecast dividend yield of 5.8% for the current year, making it one of the highest yielders in the property sector.

A UK REIT for industrial property

My first two choices cover retail and healthcare. The other part of the economy where I’d like to own property is the industrial sector. My final pick, AEW UK REIT (LSE: AEWU), owns a mix of UK commercial properties with a bias towards industry.

Around 55% of AEW’s portfolio is made up of industrial units in regional locations. The remainder is made up of office and retail property. Although there’s a small overlap here with NewRiver, I’d be happy to own both of these REITs to gain greater exposure to the industrial sector.

My main concern here is that AEW’s average unexpired lease length is just four years. Its strategy is to buy properties with short leases and then target higher rental rates. This has worked well in recent years, when demand has been strong. However, I think it could be tougher to raise rents during a recession.

For now, the economic outlook still seems healthy. AEW recently reported stable half-year profits and confirmed it plans to pay a dividend of 8p per year. That gives it a tempting 7.1% dividend yield at current levels.

The three companies I’m looking at each offer an income of at least 7% — double the FTSE 100 average. They’re all stocks I’d be happy to buy today.

This turnaround looks too cheap to me

My first pick is City brokerage firm TP ICAP (LSE: TCAP). This business is the world’s largest interdealer broker. In simple terms, what this means is that its brokers negotiate complex financial trades between other dealers and investors.

Trading profits are affected by market conditions and the continued trend towards electronic trading. To address these challenges, TP ICAP has increased its electronic trading capabilities and expanded into areas such as energy trading and data analytics.

Profits have been inconsistent in recent years, but since 2018, earnings have been trending higher again. Broker forecasts suggest that profits (and the dividend) should continue to rise in 2022.

Investors are still wary about this stock, which has been in turnaround mode for some time. I’ve been following the story and I think tide is turning. In my view, TP ICAP shares may be too cheap for me to ignore.

Consensus forecasts suggest the stock will pay a dividend of 11.6p per share in 2022, giving an 8% dividend yield. I’d buy the shares for 2022.

A direct play on the UK economy

Property group AEW UK REIT (LSE: AEWU) owns a range of commercial property across the UK. Examples include warehouses, industrial units, offices, and retail parks. AEW specialises in smaller properties in locations where it’s able to upgrade buildings and increase future rental income.

AEW’s portfolio means that, in my view, it’s a direct play on the UK economy. This REIT‘s tenants are mostly small and mid-sized UK businesses, operating in domestic markets. Management policy is to pay a fixed dividend of 8p per share each year, which gives a dividend yield of 7% at current levels.

I’m attracted to this stock as an income buy. But there’s still a risk that Covid impacts could lead to a dividend cut. Falling occupancy is another risk — vacancy levels have risen slightly since late 2019.

This FTSE 100 dividend share yields 7.5%

My third choice is FTSE 100 insurance group Phoenix (LSE: PHNX). This little-known business specialises in life insurance and retirement products. Phoenix also recently acquired the Standard Life brand.

Insurance stocks are popular with income investors as they tend to generate plenty of cash for generous dividends. Phoenix is no exception. The company says it’s on target to generate £1.5bn-£1.6bn of surplus cash in 2021. Shareholders are expected to receive around £485m of this through a dividend of 48p per share.

Broker forecasts suggest Phoenix will deliver a similar performance in 2022, giving this stock a dividend yield of 7.5%. 

The main risk I can see is that the business will struggle to find new sources of growth. Most of the company’s income comes from mature policies. It’s not yet clear how successful Phoenix will be at attracting new customers with the Standard Life brand.

Despite this risk, Phoenix’s track record gives me confidence in the firm. I’d be happy to add this high-yield dividend share to my portfolio.

Real estate got hammered by the pandemic. But with the world finally opening up again, I think there’s cash to be made investing here.

UK REIT number one

AEW UK REIT (LSE:AEWU) invests in freehold and leasehold commercial properties across the UK. They include offices, high street retail properties, and industrial warehouses.

Now, you might be thinking that offices and retail are a dying breed. Not quite, in my estimation. While brick and mortar retail has lost market share to online, people still want physical stores. And while offices aren’t the draw they used to be with more working from home, not every company is going fully remote just yet.  

“I expect we will see three or four days a week in the office as the UK recovers,” says Paul Swinney, director of research at the Centre for Cities thinktank.

There is one downside to note for this UK REIT. Full-year 2021 earnings are expected to fall to £16m, before climbing back up to £16.8m in 2022. So the share price could take a hit in the near term.

But the dividend yield AEW plans to pay over those two years will jump from 6.93% in 2020 up to a whopping 8.53%. That’s some serious cash returned to shareholders. Of course, dividends are never guaranteed. Earnings per share are expected to lift from 2.4p per share in 2020 to 6.19p in 2021, and 7.31p in 2022.

A forward price-t0-earnings ratio of 12.5 makes AEW UK REIT cheap, for me. And we heard on 15 June 2021 it won a court battle to recover £1.2m in unpaid rent. I’d buy it now for the dividends alone.

Custody battle

The second UK REIT I’d buy today for big income is Custodian REIT (LSE: CREI). Again, the figures stack up nicely for some serious future dividend yield.

A forward P/E of 15 is about average. However, I’m looking at this UK REIT for its expected 180% earnings per share growth next year. It also has a conservative net gearing at 32%, so I know it’s not overly indebted.

Today’s yield is decent enough at 3.66%. But 2022 dividends are slated to come in at 5.69%, climbing to over 6% the following year. Net profit is forecast to recover strongly from just over £2m in FY2021 to £28m in FY2022. The numbers also show that investment giant Blackrock increased its holding in May 2021.

There’s risk here, of course. Operating margins have been thinned out in recent years. And there’s obvious risk that Custodian REIT might not meet its ambitious targets for profit growth. That would hurt my investment badly.

However, I think this UK REIT is a bargain now based on what’s to come. And I do like laying down cash today, and waiting for every other investor to reach the same decision. I get my dividends, and I may get capital gains from share price appreciation, too.

A word of warning — not all penny stocks are cheap. Some deserve their low ratings, and some will fail altogether.

Even so, I reckon I’ve found three small-cap penny stocks which offer good value, reliable profits, and the potential for big gains. Should I buy them for my stocks and shares ISA?

Safer than houses?

All the recent reports I’ve seen from UK housebuilders suggest demand for new housing remains strong. One of my chosen plays in this area is AIM-listed firm Brickability Group (LSE: BRCK).

Brickability supplies bricks, roofing and plumbing and heating products under a number of brands. The company is run by Alan Simpson, who owns a 16% stake in the business where he’s worked for more than 30 years.

This pedigree suggests to me that Simpson should know how to prepare for the risk of a housing market slump. Brickability’s sales and profits dipped last year, but the company says it’s seeing improving demand for its products. Brokers expect profits to bounce back this year, putting the stock on 12 times forecast earnings.

I see this as a potential long-term growth stock. I’d be happy to buy a few shares in this penny stock and tuck them away.

A 9.5% dividend yield

My next pick is a property stock aimed at income seekers. AEW UK REIT (LSE: AEWU) owns a mix of industrial, office and retail property in regional locations across the UK.

REITs (Real Estate Investment Trusts) generally offer higher dividend yields, but AEW’s yield is unusually high, at 9.5%.

As a potential buyer, I have two questions. Is the payout safe, and will it grow? Personally, I don’t expect the firm’s current payout of 8p per share to grow for the foreseeable future. My analysis of AEW’s latest accounts suggest the dividend is still affordable, but only just. Management has warned the economic outlook is uncertain, which could affect rent collection.

During the final three months of 2020, AEW collected 90% of rent due from its tenants. If this figure improves in 2021, I reckon the dividend will probably be safe. But if rent collections worsen, then I’d expect a cut.

I don’t often see a chance to lock in a 9.5% dividend yield. I’d be happy to open a small position here, despite the risk of a cut.

An unloved penny stock

My final pick is Appreciate Group (LSE: APP). This company — previously known as Park Group — sells products such as high street gift vouchers and Christmas saving schemes. It owns the Love2shop and highstreetvouchers.com brands, among others.

The Appreciate share price is down by about 50% on a five-year view. The obvious risk is that the growth of online retail will make gift vouchers redundant. Last year was difficult for obvious reasons, with so many stores closed.

However, I think the concept of gift vouchers remains valid online, and recent trading seems to support this. Appreciate reported a 42% increase in billings in December, which was said to be the best month ever.

This penny stock trades on 11 times forecast earnings for 2021/22, with an expected dividend yield of 4.6%. I’m tempted to buy at this level.

Real estate investment trusts are a canny option for those looking for some stability in an investing world gone wild. One of the below offers a near-9% yield.

REITs are a very tax-efficient way to invest in high-value property. The vast proportion of income from this type of investment trust is distributed to shareholders as dividends.

Choosing the right UK REIT is crucial. Retail is not your friend. That means swerving away from the likes of Capital & Regional and New River Retail.

Instead look to REITs that invest in commercial warehousing, distribution centres, and office blocks. These have fared much better than their retail counterparts and the outlook is far rosier.

Box REIT clever

You will probably know the FTSE 250 REIT Tritax Big Box (LSE:BBOX) through its half-mile long logistics warehouses lining the motorways of Britain. These easy-access centres make up most of Tritax’s portfolio, which incidentally improved in value from £3.85bn to £3.94bn in the six months to 31 December 2019.

In a recent trading update chief executive Colin Godrey pointed to “strong fundamentals for 2020“. Investment volume would increase, he said, “driven by activity from overseas and institutions continuing to re-weight their portfolios“. Happily, you don’t have to be a pension fund to invest in BBOX.

Tritax has consistently improved its dividend payouts. What was a reasonable 3.9% yield in 2015, is today above 5%, so newer investors are getting a better deal. There is also much scope to increase yield in future.

The recent market dip makes shares in BBOX much cheaper than they would have been even two weeks ago. A trailing price-to-earnings ratio of 20 is not bargain basement, but it is affordable.

Go AEW

Strong decision-making by the AEW (LSE:AEWU) UK REIT saw its after-tax profits soar 60% in 2019 to hit £15.5m. Its main investments are 35 commercial properties across the UK, mostly outside the flagging London market.

Recent moves include offloading vacant units while investing in highly sought-after office blocks. Orion House in Oxford, for example, is rented out at £179k per annum, while bosses negotiated a 10-year deal to let Cedar House in Gloucester with improved rental payments, up from £300k to £321k.

The share price has not appreciated much in the last five years. But this is offset by an extremely attractive 9% yield that will compound very nicely over the next decade.

A current P/E ratio of 11 is also very cheap, in my view.

Clever clogs

I like to see intelligent active management in my REITs and AEW has this in spades. For example, it disposed of floors one to nine of Pearl House in Nottingham, which were less well occupied, while retaining the fully-let ground floor. It has sold off the underperforming Rockferry Retail Park in Hull for £1.8m.

This is the kind of decision-making that gives me confidence that portfolio manager Alex Short and assistant portfolio manager Laura Elkin are working hard to create better shareholder value. That also makes AEW’s target of 8p dividends per share more easily achievable.

All of the above says to me that this is a sound investment by anybody’s metric.

Even though equity investment trusts have been superseded by cheaper, more efficient tracker funds, open-ended investment companies, and unit trusts, mean the structure of these investment companies, unlike most other funds, they are not limited to where they can invest.

This model means that there are some very eclectic trusts out there which give investors exposure to all kinds of different assets offering market-busting dividend yields and diversification. Here are two such opportunities. 

Income from lending 

The aim of the Honeycomb Investment Trust (LSE: HONY) is “is to provide shareholders with an active level of dividend income and capital growth through the acquisition of loans made to consumers and small businesses as well as other counterparties.“

This strategy might seem risky at first, but the team behind the firm is extremely experienced. They have decades of experience and the loans are high quality. 

For example, three portfolios of 40,000 loans acquired in the second quarter had an average outstanding loan amount of £4,190. For the first half, the trust reported investment income of £13.3m, an increase of 161% on investment assets of £300.2m. At the time of its IPO, Honeycomb stated that it was targeting a dividend yield of 8% on its initial listing price of 1,000p. Since listing, it has outperformed this target, achieving an average annualised yield of 9%.

Year-to-date, the trust has paid out 48p per share in distributions and is in line to payout a total of 96p – giving a yield of 8.1% at the current share price. The net asset value per share was 1,018p at the end of Septemeber. 

Income from unloved property 

If Honeycomb isn’t for you, Aew UK (LSE:AEWU) might be of more interest. 

Aew invests predominantly in a portfolio of smaller commercial properties around the UK. These properties might not interest the likes of Land Securities, but they’re still interesting investments. 

With a net asset value of £120m, and gearing of 22%, the firm is currently producing a dividend of 8p per annum for a dividend yield of 7.9% at the time of writing. For the three months to the end of July, Aew generated £3.3m in income from operations, easily covering the dividend for the period of £2.5m. 

To help fund the expansion of the trust’s portfolio, management recently conducted a fundraise by way of a placing. Net proceeds were £27.5m, which will allow property managers to acquire new, high-quality assets to support dividend growth yet further. The company is looking to raise a total of £40m-£60m over the rest of the year to buy more assets. Management has a record of creating value, so it looks as if this cash call is the right decision. 

Aew recently sold Valley Retail Park in Newtonabbey, Belfast, for £11.1, making a return of £4m after buying it for £7.1m in 2015. 

Commercial property also has a low level of correlation to fixed income and equities asset classes, and this makes it an important investment to include as it can help to diversify risk and reduce overall volatility in a portfolio.

However, building your own property portfolio may not be an option for most investors as it requires large, upfront amounts of capital and is potentially very time-consuming. Most investors would instead benefit from putting their money into real estate investment trusts (REITs), quoted companies which own and manage income-producing property portfolios. As such, REITs offer a way for investors to access the property market without having to buy property directly.

With this in mind, I’m taking a look at two tempting high-yield REITs.

Industrial

Hansteen Holdings (LSE: HSTN) is undergoing a major transformation as the pan-European REIT sells off its entire property portfolio in Germany and Netherlands for €1.28bn. This leaves the company with investments in the UK totalling £677m, with another £35m invested in Belgium and France.

The company is also looking to increase its UK exposure, with Hansteen seeking to buy beleaguered Industrial Multi Property Trust (LSE: IMPT) for 330p per share. IMPT has a property portfolio valued at £86.2m with an annual rent roll of around £8m, but is highly geared, with a loan-to-value ratio of 73% .

Given IMPT’s estimated adjusted NAV figure of 307.4p per share, I expect the acquisition to be slightly dilutive to Hansteen’s NAV in the short term. In the longer run though, the deal seems likely to be accretive given the proximity of IMPT’s properties to existing Hansteen management offices, which will likely yield significant cost synergies. There’s also the potential for NAV growth from asset management opportunities, which due to IMPT’s high debt load, may have been previously overlooked.

Looking forward, Hansteen’s shareholders could be due a hefty special dividend of up to £600m following the sale of its German and Dutch assets. And post-special dividend, shares in Hansteen could look to trade at a respectable prospective dividend yield of 5%.

Diversification

One major benefit of investing in property via REITs over direct investment is diversification. A typical REIT owns a large number of properties and pursues a strategy of leasing properties to multiple tenants, with some even investing in a mix of property types associated with different business sectors.

AEW UK REIT (LSE: AEWU) is one such company — it’s a diversified small-cap which invests in office, retail and industrial space, with each of the three sectors representing roughly a third of its portfolio value.

The company is managed by AEW UK Investment Management, an affiliate of AEW Global, one of the largest real estate investment managers in the world, with more than €50bn in assets under management in North America, Europe and Asia. It has an annual management fee of 0.9% of invested NAV, with the company targeting a total annual return in excess of 12% on the IPO issue price over the medium term.

The REIT currently trades at a 7% premium to its NAV and pays its shareholders a yield of 7.8%.