I don’t know when I’ll be able to claim the State Pension. And I have no idea whether it will provide enough to fund my retirement plans.

What I do know, however, is that I won’t be taking a chance. So I’m investing regularly in UK shares to help me build a healthy passive income for when I eventually retire.

I have about £1,000 to invest in my Stocks and Shares ISA in October. This is made up of dividends I’ve already received and new capital I plan to use. Here are two income stocks that I’m thinking of buying for my portfolio.

Primary Health Properties

I like the excellent returns that share investing produces. But I also appreciate the security that a savings account like a Cash ISA affords.

Investing in a real estate investment trust (or REIT) can help me to enjoy the best of both worlds. Like any London Stock Exchange share, these property stocks can also go up and down in value. But they also have excellent safe-haven qualities.

REITs can provide protection against inflation. This is because the rents they charge and the value of their properties usually increase when broader prices do.

Furthermore, they usually produce stable rental income which allows them to pay decent dividends regardless of economic conditions.

Primary Health Properties (LSE: PHP) is a REIT that offers investors an extra layer of security, too. This is because around nine-tenths of the rents it receives from its healthcare properties are bankrolled by the government.

I expect the company to produce solid long-term dividend income as Britain’s ageing population drives demand for primary healthcare facilities. That’s in spite of the danger posed by uncertainty over the future of the NHS.

Primary Health Properties’ share price has tanked 18% during the past month.

As a consequence, its dividend yield has leapt to 5.8%, a level I find highly attractive.

The Coca-Cola Company

Soft drinks giant Coca-Cola (NYSE: KO) doesn’t offer the mighty dividend yield of the aforementioned REIT. But a 7% share price fall since early September has driven it to a healthy 3.2%, above its usual level.

This has made Coca-Cola shares an even more appealing way for me to boost my passive income.

The beverages maker has raised its annual dividend for — wait for it — an incredible 60 years in a row. Past performance is no guarantee of future rewards but there are many reasons I expect Coca-Cola to remain a top dividend stock.

Sure it faces extreme competition from other drinks companies. But no other has the exceptional brand power of Coke, nor the colossal financial strength to develop and market its drinks to stay ahead. It generated a colossal $38.7bn of net operating revenues last year.

These are incredible competitive advantages which make Warren Buffett such a fan (his stake in the company is valued at a staggering $25bn). It’s been a brilliant long-term stock for Buffett. And I think it could be for me, too.

Healthcare properties

Primary is a real estate investment trust, meaning it buys, operates, and rents out healthcare-related properties such as GP surgeries. The income it yields from these properties is returned to shareholders in the form of dividends. What I like about REITs is the fact that they must return 90% of profits to shareholders.

As I write, Primary shares are trading for 125p. At this time last year, the stock was trading for 153p. This equates to an 18% decline over a 12-month period. I’m not worried about this drop as many UK shares have fallen due to economic volatility and the events in Ukraine.

I like Primary shares as I believe their defensive capability stems from the fact that healthcare is an essential. No matter the economic outlook, healthcare will always be a basic requirement. This should mean that Primary can continue to perform, reward its shareholders, and grow.

In addition to this, Primary shares look decent value for money on a price-to-earnings ratio of 10. Furthermore, they would boost my passive income stream through dividend payments. The current dividend yield on offer stands at 4.9%. This is higher than the FTSE 250 average of 1.9%.

Despite my position in Primary shares, I am conscious of potential issues. First of all, dividends are never guaranteed. They can be cancelled at any time to help a business conserve cash. Next, Primary’s demand could be hurt by the rising demand for virtual healthcare in line with technological advancements. This could hinder future growth and returns.

Supermarket properties

Supermarket Income is also a REIT. It buys, owns, and rents out properties for supermarkets whether that’s retail locations or warehousing and operational properties.

So what’s happening with Supermarket shares currently? Well, as I write, they’re trading for 110p. At this time last year, the stock was trading for 115p, which is a 4% decline over a 12-month period.

As with Primary, I believe Supermarket’s defensive traits stem from the fact that food and consumer goods are essential. Despite what may be happening in the wider economy, consumers require basic goods, such as food and other consumables.

Reviewing Supermarket’s fundamentals, its shares also look good value for money on a price-to-earnings ratio of just 10. They would also boost my passive income stream as well. Supermarket’s current dividend yield stands at 5.1%, considerably higher than the index average.

Looking at potential challenges that could derail Supermarket shares, there are again similarities. With the rise in technology, online shopping delivered directly to your door has taken off in recent years. Ocado is a big player in this market but other traditional retailers have also begun offering this too. This could result in Supermarket experiencing less demand for its properties. As a result, this could hinder performance, growth, and returns.

In conclusion, I believe both of these UK shares will boost my holdings for a long time to come. As well as their favourable fundamentals currently, their defensive traits ease any concerns around the risks noted.

These real estate investment trusts can give me access to a regular income from a broad mix of commercial and industrial property.

If I wanted to invest directly in such property, I’d need millions of pounds. Using REITs, I can get started with just a few hundred.

Here are the three REITs I’d buy to get started in property investing today.

#1 Landsec

FTSE 100 REIT Landsec (LSE: LAND) owns a mixed portfolio of top-quality London office space and large regional shopping centres and retail parks.

Landsec’s focus on quality has helped it to keep occupancy high, despite changing market conditions. Modern London offices in good locations are still in demand, as are leisure and retail sites at centres such as Bluewater and Westgate.

One possible risk is that a UK recession could reverse the recovery that’s been seen during the pandemic. Landsec could be forced to cut rents in order to keep occupancy high. That could put the stock’s 6% dividend yield at risk.

There are always risks, but in my view Landsec’s strong portfolio and low levels of debt mean that the outlook should be fairly safe. I’d be happy to buy this REIT stock as an income investment today.

#2 Primary Health Properties

My second pick, Primary Health Properties (LSE: PHP), owns more than 500 GP surgeries and local medical centres around the UK.

Healthcare property is known for its long leases, and PHP’s portfolio reflects this. The trust’s average remaining lease length is more than 11 years, while 89% of its rent is paid with government funding.

This should mean that PHP can provide very reliable cash flows for the foreseeable future. The main risk I can see is that rising interest rates mean that debt costs will rise. PHP’s interest costs are mostly fixed for the next eight years, providing some protection. But I think this is still a situation that’s worth watching.

PHP shares offer a forecast dividend yield of 4.8% and trade just above their book value. That’s not especially cheap, but with occupancy at 99.7%, I think the stability of this business is worth paying for.

#3 Tritax Big Box REIT

Warehouses have been a hot investment area in recent years. One of the bigger players in this sector in the UK is FTSE 250 firm Tritax Big Box REIT (LSE: BBOX).

Key tenants include Amazon, Morrisons, and B&Q. Tritax recently reported a 0% vacancy rate, with an average remaining lease length of nearly 13 years.

Soaring prices kept me away from warehouses during the pandemic, but I reckon valuations are now starting to look more reasonable.

A UK recession could hit Tritax as demand for new warehouse space might fall. But the company’s modern properties look relatively low risk to me. I’m also reassured by the REIT’s relatively low level of debt.

Tritax shares now trade at a 30% discount to their book value of 240p and offer a 4.2% dividend yield. I think this could be a good entry point for this stock.

Buy-to-let is still a good way that investors can capitalise on soaring residential property prices. But declining tax relief, increasing day-to-day costs, and rising regulatory requirements have all made this form of property investment less attractive.

New rules introduced in recent years mean that landlords have to work much harder to make a decent buck too

Profits halve

The pressure on buy-to-let investors is rising particularly badly as mortgage rates soar. In fact data from Hamptons has revealed a shocking fall in landlords’ profits due to these increased costs alone.

The average landlord paying a higher rate of tax has seen their profits more than halve year on year in the 12 months to June, the estate agent said.

And it warned that the average second property owner could even endure losses if the Bank of England raises interest rates to 2.5%. The benchmark rate was lifted to 1.75% last week to curb soaring inflation.

REIT benefits

I think a better way to get exposure to Britain’s property sector is to invest in real estate investment trusts (REITs). In particular, I think they’re a great way to generate long-term passive income.

To be classified as a REIT a property company must pay a minimum of 90% of their profits to shareholders. This leaves no room for the board to back out of paying a dividend. If the firm is profitable it must make dividend payments to its investors. And this can give an investor a reliable passive income.

There are other big benefits of buying shares in a REIT, such as:

• They’re a tax-efficient way to invest in property.
• They give investors exposure to sectors they wouldn’t usually have (like shopping malls and healthcare centres).
• REITs attract large amounts of international capital that can be used to boost growth.
• They usually have long-term lease contracts that provide supreme earnings visibility.

2 top REITs I’m watching

There are plenty of top REITs I’m considering buying for my own portfolio. Take Primary Health Properties, for instance, a UK share that boasts a healthy 4.5% dividend yield.

This property stock invests in primary healthcare facilities like GP surgeries and larger multi-use medical centres. Demand for these sorts of new properties is booming due to the crumbling condition of existing facilities. And I expect them to keep rising as Britain’s population ages and the nation’s healthcare needs consequently rise.

I’d buy Property Health Properties even though it faces intensifying competition for acquisitions. And I’d snap up Ediston Property Investment Company too, a stock with a mighty 6.4% dividend yield.

This REIT specialises in operating retail parks. It’s a property segment that’s tipped for strong growth due to its convenience, growing choice of stores and as  e-commerce boosts demand for ‘click and collect’ services. I’d buy Ediston despite the short-term threat of rising store vacancies as consumer spending weakens.  

Here are three top picks I’d be happy to invest in right now.

Primary Health Properties

There are few more defensive parts of the market than healthcare. That’s why my first pick comes from this sector.

Primary Health Properties (LSE: PHP) is a real estate investment trust that owns 523 sites in the UK. The majority of these are GP surgeries which it lets out on long leases.

A price-to-earnings (P/E) ratio of 22 as I type looks expensive but I think reflects just how predictable earnings should be here. No less than 90% of the rent roll is paid by government bodies. If they don’t pay up then we really are in a sticky spot.

As mentioned, REITs can be a solid option for income seekers. By law, 90% of the tax-exempt profit from a REIT must be distributed to shareholders. Here, the forecast dividend yield is an attractive 4.6%.

This is not to say there aren’t risks. The rise in virtual healthcare options, whereby patients can receive advice and support from a distance, could begin to impact demand for bricks and mortar facilities in time. It will never be a catch-all solution but it’s certainly something I need to bear in mind.

Supermarket Income REIT

Just as there will always be a need for medicines and treatment, there will always be a need for food. This is why having some exposure to the supermarket sector makes sense to me.

Now, I could just buy shares in a FTSE 100 juggernaut like Tesco or Sainsbury’s. However, we know that this is an incredibly competitive space. So, a potentially safer option is to snap up shares in Supermarket Income REIT (LSE: SUPR).

This investment trust owns and lets out sites to both of the above. However, it also leases to Asda, Morrisons, Waitrose, Aldi, and Marks & Spencer. This earnings diversification should mean it can reliably go on paying long-term, inflation-linked income (4.8% yield currently) for the foreseeable future.

Notwithstanding this, the growing popularity of getting groceries delivered is a potential issue here. A P/E of 23 is hardly a bargain either.

So, again, it makes sense to spread my money around.

Safestore

Most of us have too much stuff. Fortunately, a wonderful way for me to capitalise on our tendency to over-consume is by storing some money in, well, a self-storage company.

Safestore (LSE: SFE) is a major player in the UK market. Only last week, it announced half-year profit of £285.2m. That’s up almost 71% on the same period in 2021!

A potential downside here is that the shares aren’t cheap. A P/E of 23 could come back to bite me if markets continue drifting downwards. The dividend yield is also ‘only’ 2.7%.

That said, a recent dip in the share price could a great opportunity. While higher prices are making us mindful of what we buy (and actually use) right now, I can’t help but think this will prove temporary. A nation of minimalists, we are not.

Healthcare REIT

As a quick reminder, a REIT is a business designed specifically to yield income from property. It is legally mandated to return 90% of profits to its shareholders in the form of dividends.

Primary Health Properties specialises in the purchase, development, and ownership of healthcare premises throughout the UK and Ireland. An example of a primary healthcare facility is a GP’s surgery.

So what’s happening with Primary shares currently? As I write, they’re trading for 138p. At this time last year, the stock was trading for 154p, which is a 12% drop over a 12-month period. Macroeconomic headwinds have caused many shares to pull back in recent months, so this is not a concern for me currently.

REITs have risks

The first risk of any dividend stock is the fact that dividends are not guaranteed. They can be cancelled at the discretion of the business at any time. This can be due to dwindling performance or extreme events such as a pandemic. A prime example of this was the Covid-19 pandemic when many firms cancelled dividends to conserve cash.

In regard to Primary specifically, there has been a rise in virtual healthcare options in recent years. Could this offering mean fewer people going and see their GP? There is every chance of this. If this shift were to occur, Primary could experience weakened demand for its properties and operations. This could result in the levels of returns I hope to make being negatively affected.

The bull case and my verdict

Firstly, Primary shares look decent value for money on a price-to-earnings ratio of 14. The general consensus is that a ratio of below 15 represents good value for money.

Next, Primary’s dividend yield stands at an enticing 4.5% as I write. The FTSE 100 average yield is 3%-4%. As REITs are designed to return cash to shareholders, it is not uncommon to see index-beating yields.

So what about performance? After all, performance underpins dividend payments. I do understand that past performance is not a guarantee of the future, however. Looking back, I can see Primary has consistently grown revenue and profit for the past four years. In this time, it has also continued to grow the size of its estate and number of properties.

Finally, I believe Primary has defensive attributes. Healthcare is a staple for all and nearly everyone is registered to a GP surgery here in the UK. Furthermore, resources in the UK are becoming stretched due to a growing and ageing population. This tells me the demand for healthcare services will only grow, meaning a REIT like Primary could benefit.

Overall I’m buoyed by the future of Primary Healthcare Properties. I only see the business growing and in turn, my returns increasing too. Not only will I hold my position, but I would add further shares too to increase my returns.

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.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

SSE

What it does: SSE produces energy and runs a transmission and distribution business in Scotland and England. 

By Royston Wild. Selecting robust dividend stocks in the current climate requires extra care. Soaring inflation is threatening to derail the global economy and by extension profitability for UK plc. This could have significant ramifications on shareholder payouts in the near term and beyond. 

This is why I think buying SSE (LSE: SSE) shares could be a good idea for investors. I believe the biggest threat facing this FTSE 100 stock in the near term is a painful hit from any windfall tax. 

It’s my opinion that SSE is as close to a stress-free stock one can get in these uncertain times. The business generates electricity, one of life’s essential phenomena. It also operates a power distribution and transmission division that connects 3.8m homes and businesses. 

I wouldn’t just buy the utilities business for its robustness, though. I think earnings here could soar over the next couple of decades as it increases investment in renewable energy sources. It hopes to increase renewables output fivefold in the decade to 2031. 

SSE’s forward dividend yield sits at a healthy 5.5%. 

Royston Wild does not own shares in SSE. 

Rio Tinto

What it does: Rio Tinto owns and operates a number of mines around the world. Its largest product is iron ore.

By Stephen Wright. I’m looking carefully at Rio Tinto (LSE:RIO) shares in July. The stock is a Dividend Aristocrat, meaning that it has increased its base dividend consistently over the last 25 years. 

I think that the stock is facing some headwinds that might give investors a decent opportunity to buy shares at a reasonable price in July. 

High commodity prices have been helpful to Rio Tinto’s business recently and the company has done a good job of taking advantage of this. But I think that this might abate slightly in July.

With interest rates rising and inflation still at high levels, I think that demand for finished goods is going to decline. I anticipate this weighing demand for Rio Tinto’s raw materials and bringing the stock down.

If this happens, I’m looking at buying shares for my portfolio.

Stephen Wright does not own shares in Rio Tinto.

Redrow

What it does: Redrow is a FTSE 250 housebuilder with a focus on building good quality mid-priced homes designed for existing homeowners.

By Roland Head. I find that founder-led businesses are often safer investments in troubled times, thanks to prudent financial management. Redrow (LSE: RDW) founder Steve Morgan has retired and only owns 15% of the business, but I think his influence remains.

Like all housebuilders, Redrow’s share price has fallen in recent months. But the stock is starting to look cheap to me, with a 6% dividend yield that’s covered three times by forecast earnings.

Of course, there’s still a risk we’ll see a much deeper slowdown than the market is expecting. However, Redrow started the year with £240m of net cash and a £1.5bn order book. That’s equivalent to nine months’ sales.

My sums suggest Redrow’s 6% dividend yield will be safe, even if we do suffer a recession. For this reason, I think this could be a top dividend stock to buy in July. I’m considering Redrow for my own portfolio.

Roland Head does not own shares in Redrow.

Primary Health Properties  

What it does: Primary Health Properties is a real estate company that owns healthcare properties across the UK and Ireland.

By Edward Sheldon, CFA. There are a few reasons I’ve selected Primary Health Properties (LSE:PHP) as my top dividend stock for July.

The main reason is that the company has defensive attributes. Not only does it operate in a defensive industry (people aren’t going to stop going to the doctor because there’s a recession), but a large chunk of its revenues are backed by the UK government. So, it’s a sleep-well-at-night stock, to my mind.

Another reason is that it owns ‘real assets’ – physical assets that have real value to society. In the past, these kinds of assets have protected investors against inflation.

Additionally, there’s a nice dividend here. At present, the prospective yield on offer is around 4.7%.

This dividend stock does have a slightly higher valuation. Currently, the forward-looking P/E ratio is around 20, which adds some risk.

However, I’m comfortable with the valuation here given the company’s defensive attributes and attractive yield.

Edward Sheldon has no position in Primary Health Properties. 

Warehouse REIT

What it does: Warehouse REIT owns a diverse collection of well-positioned warehouses across the UK, primarily serving e-commerce enterprises.

By  Zaven Boyrazian. With the pandemic accelerating the adoption of e-commerce, a growing problem has emerged. More products are being bought and sold online, requiring greater warehousing space that seems to be running out.

Warehouse REIT (LSE:WHR) is one of several players trying to solve this challenge. And so far, it’s significantly enjoying the tailwinds of surging demand. With the value of its storage facilities climbing and management successfully raising rental prices, free cash flow has exploded over the years, resulting in an attractive dividend yield of 4.2% today.

A lot of its property acquisitions have been funded through debt. And now that interest rates are rising, margins are expected to be squeezed. In fact, that’s why its shares have tumbled by 12% since the start of 2022. But with underlying operating margins standing at around 70%, I don’t see this as a major threat, making the recent drop a buying opportunity for investors, in my eyes.

Zaven Boyrazian does not own shares in Warehouse REIT.

HSBC

What it does: HSBC is a global banking and financial services firm, with segments ranging from mortgages to investment banking.

By Andrew Woods. HSBC (LSE:HSBA) showed resilience following a fall in profit during the pandemic. Between 2020 and 2021, pre-tax profit more than doubled from $8.7bn to $18.9bn, in line with a bounce back in consumer demand and a more favourable economic environment. The 2021 dividend payment of $0.25 per share equated to a dividend yield of 4.5%. HSBC has been consistent with its yields over the past five years. 

The company may now also benefit from rising interest rates. In the UK and US, these rates are now at 1.25% and between 1.5% and 1.75%, respectively. More rises may come in July. Interest rates are important for a business like HSBC, because they can dictate how much it can charge for its lending services. These products may include loans and mortgages. The cost-of-living crisis, however, may deter some potential customers from taking on more debt, which could be bad news for HSBC.

Andrew Woods does not own shares in HSBC.

Phoenix Group Holdings 

What it does: Phoenix Group Holdings is the largest long-term savings and retirement business in the UK. It offers a range of life and pension products across several brands.  

By Harshil Patel.  Currently yielding 8%, Phoenix Group Holdings (LSE:PHNX) is my top dividend stock pick for July. With the average FTSE 100 share yielding 4%, Phoenix Group is a breath of fresh air when searching for dividend income.  

With consumer price inflation rising to over 9%, it comes close enough to battling rising prices.  

2021 was an outstanding year for Phoenix. It delivered record cash generation that allowed for a 3% lift in dividend. With resilient cashflow and a strong balance sheet, I reckon the future looks bright. 

It has demonstrated an excellent track record with strong dividend growth over the past decade. Much of that growth came from new acquisitions, but what’s exciting is that this year’s dividend growth arrived organically.  

Phoenix is proving to be a growing and sustainable business. Another characteristic I like is its resilience in volatile markets like the one we have currently. It seems its hedging approach might make it more resilient versus many of its peers.  

Harshil Patel does not own shares in Phoenix Group Holdings.

Unilever

What it does: Unilever is a fast-moving consumer goods company dealing with branded products in beauty, personal care, foods, refreshment and home care.

By Kevin Godbold. I’m delighted Unilever (LSE: ULVR) appears on my high dividend yield stock screens. The company’s attractions led to the valuation being too high for my taste for years — until now.

Worries about recession, the war in Ukraine and the cost of living crisis have all conspired to drive the stock price down this year. However, in April, chief executive Alan Jope delivered a reassuring update on recent trading. “We are executing well in a very challenging input cost environment,” he said. And he reckons underlying sales growth of 7.3% had been driven by strong pricing.

And that’s excellent news because it means Unilever’s strong brands are maintaining pricing power. That suggests an ability to protect margins in inflationary economic environments.

Meanwhile, Unilever’s financial and trading record is a thing of beauty. And I have confidence the business can maintain its rising dividend stream in the years ahead.

Kevin Godbold does not own shares in Unilever (yet, but likely will do soon!)

British American Tobacco 

What it does: Operating in 175 markets worldwide, British American Tobacco manufactures and sells cigarettes as well as other nicotine products.

By Charlie Carman. Unclouded by falling tobacco consumption in developed markets, British American Tobacco (LSE: BATS) is a top FTSE 100 performer in 2022. The share price has increased 30% this year to date.  

It’s a true Dividend Aristocrat. British American Tobacco shares offer a 6% dividend yield and shareholder distributions have risen consistently since 1999. In addition, the company announced a £2bn share buyback programme earlier this year.

There are regulatory threats facing this tobacco giant in many key markets. For example, the US Food and Drug Administration recently announced plans to set maximum nicotine levels in cigarettes and other tobacco products.

However, the company aims to counteract such challenges via its reduced-risk vapour products and tobacco-free nicotine pouches. It’s targeting 50m consumers of non-combustible products by 2030.

The tobacco industry’s demise has long been predicted but failed to materialise. I believe British American Tobacco shares can boost my portfolio’s returns for years to come.

Charlie Carman owns shares in British American Tobacco. 

Somero Enterprises

What it does: Somero is a manufacturer of laser-guided equipment used to place and screed concrete slab in buildings.

By Paul Summers: I’m biased when it comes to Somero Enterprises (LSE: SOM). I’ve held this high-quality, US-focused company within my S&S ISA for a few years now. Quite a bit of this has to do with the dividend stream it offers.

As I type, Somero is forecast to yield almost 10% in the current financial year. That’s going to take an awful lot of the sting out of galloping inflation. This cash return is also likely to be reasonably covered by profit, meaning it should actually get paid.

One risk I need to continue bearing in mind here is that Somero is undoubtedly a cyclical business. As such, the share price could head lower in the near future if a recession becomes a reality.

However, the stock already trades at less than eight times earnings. So, I suspect/hope a lot of bad news is already priced in.

Paul Summers owns shares in Somero Enterprises.

Grafton

What it does: Grafton is a merchant that sells all sorts of building materials. These include timber, decor, DIY items, and more.

By John Choong. Grafton (LSE: GFTU) is one of the few potential beneficiaries of the government’s new Help to Build scheme. Unlike Help to Buy, the new initiative won’t directly benefit the traditional property developers. This is because the new initiative is only available for houses built by self or custom-builders. Due to Grafton’s excellent relationship with independent builders, it could stand to benefit from the tailwind of the new scheme.

While the group has a manufacturing segment, the bulk of its revenue comes from its distribution businesses. This is where I expect most of the growth to come from. So, if the group’s top line receives a boost from new builds, I expect both its share price and dividend pay out to increase substantially, hence making its current share price cheap. After all, it’s currently trading at a P/E ratio of 9.14. Not to mention, Grafton has healthy profit margins too, which makes it an attractive stock for investors to purchase.

John Choong has no position in Grafton

Two of the stocks I own are real estate investment trusts (REITs). As a quick reminder, a REIT is a business set up to make money from income-yielding property. They are legally required to return 90% of profits to shareholders.

I must note there are risks to investing in REITs to boost my passive income stream. As with any dividend stock, dividends are paid at the discretion of the business, meaning they can be cancelled at any time. Furthermore, if a REIT cannot rent out or collect rent from its properties, it cannot generate a profit and pay a dividend.

Passive income stock #1

Supermarket Income REIT (LSE:SUPR) invests in supermarket-related property in the UK. One of its core aims is to provide inflation-linked income. In fact, over 80% of the business’s rental income is tied to inflation. With inflation currently rising, Supermarket’s rental income should increase, in turn, increasing my returns.

So what’s the current state of play with the Supermarket share price? Well, as I write, the shares are trading for 127p. At this time last year, the shares were trading for 118p, which is a 7% increase over a 12-month period.

I view the grocery business as a defensive option. Despite the current macroeconomic outlook and cost of living crisis, people need to eat. This tells me that retailers will need the kinds of properties in Supermarket Income REIT’s portfolio.

As well as favourable market conditions, Supermarket shares carry an enticing dividend yield of close to 5%. This is higher than the FTSE 100 average of 3%-4%. The shares also look good value for money right now with a price-to-earnings ratio of just nine.

Finally, Supermarket’s performance historically has been excellent. I do understand that past performance of UK shares are not a guarantee of the future, however. Looking back I can see it has grown revenue and profit year on year for the past four years.

I have owned Supermarket shares for some time now and may add more soon to boost my passive income stream.

Stock #2

The second stock is Primary Health Properties (LSE:PHP). It is a REIT that specialises in the purchase, development, and ownership of primary healthcare premises in the UK and Ireland. An example of this is GP surgeries.

Let’s look at Primary’s share price now. As I write, the shares are trading for 136p. At this time last year, the shares were trading for 157p, which is a 13% drop over a 12-month period.

I believe Primary Health Properties has defensive attributes too. Healthcare demands have only increased in the UK and Ireland due to an ageing and growing population. If Primary Health Properties can continue to provide quality locations, it should continue to yield rental income and boost returns in the form of dividends for passive income seekers like myself.

So what about the dividend yield? Well, the shares have a yield of 4.5% currently, which is also higher than the FTSE 100 average. The shares are a bit more expensive than Supermarket Income, on a price-to-earnings ratio of 14.

Primary also has a good track record of performance. Looking back I can see it has grown revenue and profit for the past three years in a row.

Like Supermarket Income and many of my UK shares that pay a dividend, I intend to hold my position in Primary Health Properties for the long term to boost my passive income stream.

‘Recession-proof’ UK shares

With the possible exception of anything racey in the biotech world, most health stocks tend to hold their own in recessionary times. Regardless of how the economy is performing, people get ill and/or need ongoing medical support. It’s this predictability that I think makes shares in this space worth researching further.

My personal favourite remains GlaxoSmithKline (LSE: GSK). A valuation of 14 times earnings before markets opened on Friday still looks very reasonable, considering it’s a global leader in developing and manufacturing medicines and vaccines.

This is not to say that an investment in GSK isn’t without a few issues. There’s a lot going on behind the scenes as the company gets set to spin off its consumer healthcare division (Haleon) in July — a move that has forced a big reduction in the dividend. After a few lacklustre years, CEO Emma Walmsley also remains under intense pressure to grow profits.

To quell some of these concerns, I’d also consider an investment in Primary Health Properties (LSE: PHP). As it sounds, Primary is a Real Estate Investment Trust (REIT) that buys healthcare-related properties and then lets these out long term to GPs and other medical professionals.

Right now, there are no less than 523 facilities on its books, 99.7% of which are occupied. A recession won’t change that, especially given the psychological scar left by a two-year pandemic. A mere 4% reduction in the PHP share price in 2022 (as of Friday morning) supports this view.

In addition to the stability it offers, Primary offers a chunky yield of 4.5%.

Dull but defensive

As difficult as the energy price rises we’ve seen over recent months have been for consumers, they’ve also highlighted just how dependent we are on electricity, gas and water. Seen purely from an investment perspective, there’s no shortage of options for me to tap into this defensiveness.

My usual go-to utility is power provider National Grid (LSE: NG) and I’m not about to change my mind. Despite being about as dull as a listed stock can get, the company is also incredibly defensive.

On the downside, National Grid isn’t quite the bargain it used to be. Having climbed 13% in value in 2022, shares trade at a P/E of 19. That’s far above the five-year average of 13.5 times earnings.

Notwithstanding this, the Grid is still cheaper to acquire than other utility-related stocks at the moment. And at 4.2%, I think it’s worth buying for the dividend yield alone.

Buy on weakness

Recession or not, everyone will still need to eat and keep clean. For me, that makes owning stock in a company from the consumer goods space essential. I’d go for Unilever (LSE: ULVR) here. That almost sounds controversial these days.

The FTSE 100 juggernaut hasn’t exactly been in many investors’ good books lately, due to flagging earnings growth and, according to star fund manager Terry Smith, an obsession with showcasing its ethical credentials. However, this is still a fundamentally good business, boasting great returns on capital and high margins.

Unilever also has a worldwide presence, meaning it is not too dependent on one geographical area for earnings. As a result of growing affluence in emerging markets, there’s lots of potential ‘white space’ left for the company to grow into too. From Marmite and Ben & Jerry’s to Domestos and Comfort, the company’s bursting portfolio of 400 brands are recognisable and in constant demand.

No supermarket?

“Why not add a supermarket too?“, I hear you cry. Well, I’m not against this idea. However, the level of competition in this part of the market shouldn’t be underestimated. And, during recessionary times, I think it’s the German discounters Aldi and Lidl, whose tills will be ringing more frequently than listed rivals. As such, I’d prioritise buying shares in companies whose products will be sold universally rather than who is selling them.

Yesterday, Unilever shares traded at 17 times earnings. That’s lower than its average over the last five years. To me, this looks great value for what remains a high-quality company, albeit one that — regardless of a looming recession — needs to recapture its form.

For me, the biggest risk here is the ‘opportunity cost’. In other words, it’s the profits I could potentially lose out on through investing here and not in other UK shares capable of growing quicker. On a more positive note, there’s a 4.2% dividend yield on offer while I wait.

Discount demon

I’d also add B&M European Value Retail (LSE: BME) to the mix. The FTSE 100 company was a huge beneficiary of multiple UK lockdowns after being awarded ‘essential’ status by the government and permitted to keep its stores open.

Since then, sentiment around the stock has dwindled, not helped by the recent announcement that long-standing CEO Simon Arora is to retire next year after 17 years. Full-year numbers from B&M, due next week, may also struggle to impress an increasingly skittish market.

Despite this, it does feel like a lot of the current market headwinds are priced into the shares. Fittingly, a P/E of 11 for the new financial year already looks good value to me. A 5.4% dividend yield, safely covered by profit, is also in the offing.

Don’t get me wrong – I suspect things will be tough for most retailers going forward. However, if there’s one business plan in this sector that should work in troubled economic times, it belongs to B&M. As incomes get stretched, we instinctively look for bargains. Another purple patch for B&M could lie ahead.

Safety in numbers

Of course, no one knows for sure what the future holds. History can only show us what has worked previously when it comes to identifying which sectors tend to be immune to the economic cycle. As we’re repeatedly told by money managers in the City, ‘past performance is no guide to the future‘.

This is why it’s important to spread my money across multiple sectors, as I’ve attempted to do above. If healthcare stocks take a tumble, my utility stock should help mitigate the damage done. If consumers shun labels, a discount retailer will be there to help.

It’s not a perfect plan, but it is a Foolish one. And that’s good enough for me.