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Two dividend stocks that I own for their juicy returns are Primary health properties (LSE: PHP) and Warehouse REIT (LSE: WHR).
Over the past few weeks, I have received dividend payments from both companies. I have decided that I would love to buy more shares when I can. However, it is worth remembering that dividends are never guaranteed.
Here's why!
What they do
Both stocks are organized as real estate investment trusts (REITs). The appeal of these types of stocks is that they must return 90% of profits to shareholders.
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They make money from the real estate assets they own, operate and rent.
In the case of Primary Health, the name gives it away: it rents healthcare facilities from providers such as the NHS for GP surgeries.
Warehouse also does what its name says, specializing in warehousing and logistics facilities.
Primary's investment case
In my opinion, primary education has excellent defensive qualities, since health care is essential for everyone.
Furthermore, given that one of its main customers is the NHS, this encourages investment as the government is essentially the one paying the rent. In turn, the likelihood of defaults is low and multi-year agreements give Primary a sense of income stability.
Next, as the UK population continues to grow and age, I believe demand for healthcare should remain strong.
Finally, a dividend yield of over 6% is very attractive. To put it into context, FTSE 100 Index The average is closer to 3.6%.
From a pessimistic perspective, there has been a lot of talk in recent years about professionals leaving the sector or moving abroad. This is linked to working conditions and pay disputes. One risk I will be watching closely is Primary's growth. It's all very well buying new assets, but the NHS and other providers may lack the right workforce to fill them. This could hurt earnings and profitability.
The Warehouse Investment Case
The rise of e-commerce has been beneficial for Warehouse REIT, which focuses on last-mile delivery centers and leases them to major retailers. I believe it will continue to benefit from the current shift in shopping habits.
However, from a bearish perspective, recent economic volatility is worrying and I will be keeping a close eye on developments. High inflation as well as higher interest rates have impacted commercial property values and reduced net asset values (NAVs). Warehouse has had to sell some assets to shore up its balance sheet and weather the current turbulence.
Back to the bullish scenario, the first interest rate cut was confirmed this month. If this trend continues, economic pressures as well as increased consumer spending and demand for warehouse facilities could be good news. However, I understand that there is no guarantee that there will be further cuts or when they will occur.
Finally, a dividend yield of over 7% is tempting. The stock also appears to be a good value with a price-earnings ratio of just over 10.
