Social housing REIT

As a quick introduction, Triple operates as a real estate investment trust (REIT). This means it invests in, and yields income from, operating property — social housing projects, specifically. It focuses on supported living housing for vulnerable people with complex care needs. As a REIT, it must return 90% of profits to shareholders in the form of dividends. This is what makes it attractive to me as a potential stock to boost my passive income stream.

So what’s happening with Triple shares currently? Well, as I write, they’re trading for 84p, making it a penny share. At this time last year, the stock was trading for 97p, which is a 13% decline over a 12-month period.

A passive income stock with risks

I believe that Triple’s performance and investment viability could come under threat due to the impending care reforms in the UK. The reforms coming in next year could put a cap on social housing amounts for adults in need, which could negatively affect Triple’s demand and the amount of money it could make. In turn, this could affect the return to shareholders. Furthermore, as a result of the current economic climate, the government is looking to cut costs across the board. Social housing budgets could be slashed, which would also affect firms like Triple.

Finally, as with any dividend stock, I must remember that dividends are never guaranteed. They can be cancelled at the discretion of the business at any time. This can particularly occur during times of economic volatility, like now, to conserve cash.

The bull case and what I’m doing now

So let’s take a look at some positives. Firstly, I can see that Triple’s dividend yield currently stands at 6.3%. This is higher than the FTSE 100 and FTSE 250 averages of 3%-4% and 1.9%, respectively. I am also buoyed by the fact that it has paid all dividends since the company formed in 2017. In addition to this, the shares look decent value for money right now on a price-to-earnings ratio of just 11.

Next, I can see Triple has a good track record of performance. I do understand that past performance is no guarantee of the future. However, looking back, I can see it has increased revenue for the past four years in a row. This will have supported its consistent dividend for this period. Furthermore, its most recent trading update was positive. This was a full-year report for the year ended 31 March 2022. It reported that revenue, rental income, profit, and dividend all increased compared to 2021.

Finally, I believe Triple could benefit from surging demand for homes, including social housing, in the UK. Demand is outstripping supply currently. Triple could leverage this demand to boost performance as well as returns moving forward.

To summarise, based on the positives noted above, I believe Triple Point Social Housing REIT could be a great stock to boost my passive income stream. I already own a number of REITs as part of my holdings and would happily add Triple shares to this too.

Here are two ideas I’m exploring to earn £1,000 per month in the future.

1. Dividend stocks

Buying high-yield dividend stocks is a great way to secure regular returns. In particular, I look for blue-chip companies with strong track records of delivering reliable payments to shareholders. Plenty feature in the FTSE 100 index.

One example is Switzerland-based commodities giant Glencore (LSE: GLEN), which looks well-placed to thrive amid Europe’s ongoing energy crisis. Up 28.5% this year, the stock’s outperformed and I think there could be further gains ahead. The company sports a 4.27% dividend yield, making it a great fit for my passive income portfolio.

Rising commodity prices are bullish for the Glencore share price. Indeed, the business recently announced a $4.45bn dividend and share buyback windfall for investors, supported by soaring coal earnings.

The stock isn’t risk-free. Worldwide recessions could suppress industrial demand for metals and oil. This would be a headwind for further growth as these commodities are major contributors to the company’s balance sheet.

Nonetheless, the war in Ukraine continues to fuel disruption across energy markets with no peaceful resolution in sight. I view Glencore shares as one way to neutralise the impact this has on my portfolio. I’d buy today.

2. REITs

Beyond more conventional stocks, I try to manage risk through diversification by investing in real estate investment trusts (REITs) to gain exposure to income-producing property. I like the fact that REITs are obliged to distribute 90% of profits from their rental businesses to shareholders. They also don’t pay corporation tax on these earnings. Plus, it’s more passive than being a landlord.

One on my watchlist is Triple Point Social Housing (LSE: SOHO). Launched in 2017, the group aims to provide reliable, inflation-linked income from its portfolio of social housing assets. It has a particular focus on supported housing for vulnerable adults with long-term care needs.

The latest financial results are encouraging. Rental income rose 16.6% while total expenses remained largely stable, increasing by 4.8%. Net profit, earnings per share and net assets all experienced positive growth. Most importantly, Triple Point has paid all target dividends in full since inception. It expects these will “continue to increase in line with inflation“.

Changes in Britain’s political leadership make for an uncertain future. If a new Prime Minister reduced investment in social housing, the group could struggle. Nevertheless, I’m prepared to take this risk and I’d invest for the solid dividend history and promising forecast.

My passive income portfolio

The annual dividend yield of my envisaged portfolio is higher than the Footsie average of 3.7%. Glencore and Triple Point yield 5.17% collectively. Taking this pair as indicative of my overall holdings, I’d need a total portfolio value of £232,109 to generate £1,000 per month.

While actual returns may be lower, theoretically I could achieve this goal in just under 15 years by saving £10,000 each year and reinvesting the dividends to capitalise on compound returns. Crucially, this calculation conservatively assumes zero capital growth on my investments!

Proton Motor Power Systems

The news flow coming out of Proton Motor Power Systems (LSE: PPS) has been highly encouraging in recent weeks. Yet this hasn’t prompted an improvement in the company’s share price so far (it remains 63% cheaper than at this time last year). I think the market has missed a trick here and would consider buying Proton today.

This penny stock manufactures stationary power units and fuel cells for cars, boats, and trains that utilise hydrogen technology. And earlier this month it announced it had made “a promising start to 2022” with €1.3m worth of orders booked so far. This adds to the €3.2m worth of orders Proton booked last year.

I think Proton Motor Power System’s profits could soar as the climate emergency drives demand for cleaner energy systems. Competition from alternative power sources remains a threat, of course, but I think the potential size of the hydrogen market still makes it a top stock for me to own. 

Creightons

Beauty and personal care product maker Creightons (LSE: CRL) remains 3% more expensive that it was 12 months ago. But the share price has plummeted around 50% from September’s record peaks as investors fear the impact of rising inflation on consumer spending.

This is a risk I need to consider, along with the possibility that demand for Creightons’ hand sanitiser could sink as the pandemic recedes. However, on balance I believe the penny stock is still an attractive investment target. I think demand for its skincare and healthcare products could rise strongly as people get out and about again following Covid-19 lockdowns.

I’m also encouraged by Creightons’ acquisition of the Emma Hardie and Brodie & Stone brands last year to strengthen its branded product ranges. The business has a cash-rich balance sheet which could help it hunt for more takeover targets as well.

Triple Point Social Housing REIT

The Triple Point Social Housing REIT (LSE: SOHO) share price has fallen 16% in value over the past year. This has consequently taken the company firmly into penny stock territory. As a long-term investor I think this weakness makes it an attractive dip buy.

Triple Point provides accommodation for individuals with special needs. This is a market which is tipped for strong growth — the London School of Economics has previously said that 200,000 new specialised supported housing units will be needed between 2015 and 2030. The business is highly active on the acquisition front to fully capitalise on this opportunity too.

Changing government policy regarding social housing funding could hit Triple Point’s profits hard. But as things stand today I believe the business remains a great stock to buy for solid long-term returns in my portfolio.

Cairn recently reported that its revenues rocketed 61% in the six months to June, while its order book leapt to €655m from €214m at the start of 2021. Encouragingly, evidence shows that buyer demand has remained electrifying since then too. Average property prices in Ireland soared 12.4% in the 12 months to September, according to the country’s Central Statistics Office. This was also up from 10.9% in the previous month.

Big margins at Cairn Homes are also helping to drive profits right now (it expects a gross margin of 19% in 2021). However, I am aware that margins could start to recede if supply chain issues mean building material costs keep surging, hitting shareholder returns in the process.

Another housing hero

I think investing in Triple Point Social Housing REIT (LSE: SOHO) could be a good way to insulate myself against the danger posed by Omicron. After all, demand for the accommodation it provides (to people with special needs) remains stable during good times and bad. The business collected 100% of rents even as the Covid-19 crisis savaged the British economy.

Security isn’t the only reason I like Triple Point Social Housing. I also like the steps it’s taking to boost its property portfolio, the company adding a raft of new assets to its books for a shade under £30m last month. Such action will allow it to capitalise on the fast-growing specialised supported housing (SSH) sector to full effect.

Finally, I like Triple Point’s classification as a real estate investment trust (REIT). This ensures it has to pay a minimum of 90% annual profits out by way of shareholder dividends.  I’d buy the business despite the danger of overpaying for acquired assets which fail to deliver the desired rewards.

An electric vehicle penny stock

TI Fluid Systems is a UK share I bought last year to latch onto the electric vehicle revolution. And I’m thinking of investing in European Metals Holdings (LSE: EMH), which operates the massive Cinovec lithium project in Czechia. Most plug-in hybrid and battery-powered cars contain lithium-ion batteries, meaning European Metals can expect sales of its product to soar.

I’m also a fan of this company because it’s located slap bang in the middle of Europe’s carbuilding belt, making it simpler to sell its product to major manufacturers. Pleasingly, sales of low-carbon vehicles are booming in Europe. According to ING Bank, new registrations leapt 41% in the five years to 2020, beating the US and its figure of 28% by a wide margin.

The European Metals share price could suffer if development of Cinovec hits trouble, of course. However, all things considered, I think the reward-to-risk profile of this penny stock is highly attractive.

The following two dividend-paying penny stocks have slumped in value in recent months. Here’s why I’d spend £1,000 on each of these low-cost shares right now.

7.2% dividend yields

The Centamin (LSE: CEY) share price has been battered by a notable fall in gold prices. Bullion prices have dropped 7% in the past 12 months. That’s pulled FTSE 250-quoted Centamin 41% lower over the same period. It now trades just inside penny stock territory at 99p per share.

I think the gold miner’s a great contrarian stock to pick up today.  Not only does it trade on a forward price-to-earnings growth (PEG) ratio of 0.7, but Centamin also carries a brilliant 7.2% dividend yield for 2020 too.

This sort of huge yield can help investors offset the problem of rising inflation and still make decent real returns. In fact, the impact of rising inflation could help lift safe-haven assets like gold again and with it, Centamin’s share price. US consumer price inflation rose back to recent 13-year peaks in September, at 5.4%, data on Wednesday showed. Though remember that gold prices could extend their downtrend if central banks tighten policy quicker and more sharply than expected in response to the inflationary threat.

A penny stock that’s to the point

I also believe Triple Point Social Housing REIT (LSE: SOHO) could be one of the best dividend-paying penny stocks to buy today. This UK share provides social housing to adults with specific long-term care requirements. Its focus on one of the more defensive parts of the property market means earnings should remain robust even as the British economic recovery cools.

There’s another reason I like Triple Point. Under real estate investment trust (REIT) rules, the business is obligated to distribute at least 90% of annual profits to investors in the form of dividends. As a consequence, the forward dividend yield here sits at a mighty 5.1%.

Triple Point’s share price has dropped 15% from August’s record peaks, to 98p. It’s now trading on a price-to-earnings (P/E) ratio of just 14 times as a result. I think this valuation is pretty undemanding given the penny stock’s resilient operations and its excellent growth prospects.

Learning disability charity Mencap has estimated that demand for specialised supported housing (or SSH) units will grow to between 29,000 and 37,000 units by 2027/28. That’s up from 22,000 and 30,000 units 10 years earlier.

I think Triple Point’s a great penny stock to buy, even if construction delays and cost overruns could significantly damage profits. Rising raw material prices and building product shortages make this a particularly pertinent danger today.