Real estate investment trusts (REITs) are insanely popular with UK share investors. They allow individuals to get exposure to the property market without the hassle of having to buy, manage, or fund any bricks-and-mortar assets themselves. And the way they are regulated means that they can deliver stunning income flows to their investors.
However, not all REITs are in strong shape to provide UK share investors with stunning returns today. Here I’m going to discuss three dividend-paying REITs and consider whether you should buy or avoid them.
2 top property stocks
- I reckon Urban Logistics REIT has the tools to deliver stunning profits over the next decade. It provides large logistics facilities all over the UK, so it is well placed to ride the e-commerce phenomenon. But this is not all. The bulk of its 30-plus properties are located in and around the Midlands and the South East. These regions suffer particularly badly from the supply crunch besetting this specific segment of the property market. And this is allowing it to maximise rental income. Today the UK share carries a decent-if-unspectacular forward dividend yield of 2.7{429fc2506e610357e12b2a5665db82631200a2e00b3a1d8839077d76f18e2e8b}. However, for those seeking strong dividend growth in the years ahead I reckon Urban Logistics could prove to be a winner.
- I wouldn’t consider investing in Secure Income REIT, though, even though it sports a 5.7{429fc2506e610357e12b2a5665db82631200a2e00b3a1d8839077d76f18e2e8b} dividend yield for 2020. The company is exposed to a number of cyclical sectors, and this bodes badly as the economy sinks and Covid-19 restrictions are reimposed. The UK share’s had to defer rents from Merlin Entertainments, for instance, until next autumn. The theme park operator is Secure Income’s biggest client by rent. It’s also had to reduce rents from Travelodge, another major rent payer. Like all REITs the business has to pay 90{429fc2506e610357e12b2a5665db82631200a2e00b3a1d8839077d76f18e2e8b} of profits to shareholders through dividends. But with earnings threatening to fall through the floor this income share is a risk too far, in my opinion.
- I’d much rather stash the cash in Civitas Social Housing today. This particular property investment trust invests in social housing for individuals with specific care needs. As a consequence this UK share has exceptional profits visibility through economic upturns and downturns. And this gives it the confidence to pay big dividends to its shareholders, hence the company’s 5.2{429fc2506e610357e12b2a5665db82631200a2e00b3a1d8839077d76f18e2e8b} dividend yield for this fiscal year. As Civitas non-executive chair Richard Wrobel has commented, the specialist assisted living segment is “one of the fastest growing sub–sectors in healthcare real estate”. And this makes the business one of the hottest property plays out there.
More top UK shares
I strongly believe Civitas and Urban Logistics could make investors a lot of money in the years ahead. But they’re not the only UK shares that could supercharge the returns you enjoy on your invested cash. The Motley Fool’s huge catalogue of exclusive reports discuss plenty more brilliant dividend stocks you can buy today.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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