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I think REITs may be among the best stocks to buy long-term passive income. Your commitment to pay out at least 90% of annual earnings in the form of dividends can provide investors with a lot of extra money.
join group (LSE:UTG) is a REIT that I have been thinking about adding to my own portfolio for some time. And my appetite for it FTSE 100 business is up following today’s strong year-end update.
So what’s been going on?
Unite is one of the largest student accommodation providers in the country. And on Tuesday he said he expects 2022 adjusted earnings per share (EPS) to come in.”at the top end” from an expected range of 40p to 41p.
Chief Executive Richard Smith commented that “bookings are significantly ahead of recent sales cycles, reflecting strong demand from new and existing students, as well as new nomination deals with universities”.
He added that “We now expect to achieve rental growth of at least 5% by the 2023/24 academic year, which will help offset the cost pressures we are facing through higher utility and staff costs”.
Previously, the company expected to see rental growth of between 4.5% and 5%.
Unite said that 70% of its rooms were already sold for the next academic year. That’s significantly higher than the 60% figure he posted a year ago for the current academic term.
The company said it is witnessing “an increasing number of students seeking secure accommodation earlier in the sales cycle than in previous years”. He also said that the demand for universities has also been increasing.
dividend growth
Unite clearly has the wind in its sails. However, in the current economic climate, there is no guarantee that the demand for its rooms will continue to increase. Students could shelve plans to continue studying if the cost-of-living crisis drags on.
But encouragingly, City analysts believe Unite’s annual earnings should continue to grow even as the UK economy tanks. Profit increases of 10% and 6% are forecast for 2023 and 2024, respectively.
As a consequence, brokers expect the REIT to keep increasing dividends. The expected reward of 32.55 pence per share for 2022 is expected to rise to 36.1 pence this year and 38.2 pence in 2024.
This means that a dividend yield of 3.9% for this year increases to 4.1% for next year.
Why I would buy this REIT
These aren’t the highest returns among British REITs, for sure. But as an investor looking for long-term, growing passive income, I still think Unite is one of the best stocks to buy.
real estate agent savills The European population aged 15-19 is expected to grow by 5.8% between now and 2027, suggesting that the number of students in the UK should also continue to rise strongly. However, the development pipeline for student housing remains weak and a colossal supply shortage looms.
Therefore, companies like Unite can expect strong rental growth in the coming years. And by extension, it looks like earnings and dividends will continue to rise at a healthy rate as well. With cash to spare, I will look to add this REIT to my stock portfolio soon.
