I believe real estate investment trusts (REITs) are a great way to boost passive income through dividend payments. This is because these trusts are designed to return 90% of profits to shareholders. I already own a number of these types of stocks as part of my holdings. Another REIT I’m considering adding to my holding is Assura REIT (LSE:AGR). Here’s why.
As a quick introduction, Assura is a property business that focuses on GP surgeries, primary care, and community healthcare buildings. It designs, builds, invests in, and manages these properties as well as earning rental income from them.
So what’s happening with Assura REIT shares currently? Well, as I write, they’re trading for 67p. At this time last year, the stock was trading for 74p, which is a 9% decline over a 12-month period.
A REIT with risks I must consider
Let’s consider some bearish aspects first then. As with any stock I look to buy for boosting my passive income stream, I must remember dividends are never guaranteed. These can be cancelled at the discretion of the business. Some reasons that this can occur are economic volatility, a financial crash, or a one-off, unexpected event like a pandemic. Dividends are cancelled to conserve cash.
Another issue I feel could affect Assura’s level of returns is the fact most of its buildings are used by the NHS. There is a chance that an NHS price cap for renting such facilities could be enforced. This would limit the income Assura could earn and limit returns I hope to make. This is a development I will keep an eye on.
Why I like Assura shares
So to the positives then. Firstly, I believe that Assura REIT has excellent defensive traits. This is because it provides its properties to the healthcare sector, specifically the NHS. Healthcare is a staple for all. No matter the economic outlook, healthcare services will always be needed. This demand level should continue to boost Assura’s performance and levels of returns.
Next, I can see Assura has a great track record of performance. I do understand that past performance is not a guarantee of the future, however. Looking back, I can see Assura has grown revenue and gross profit for the past four years in a row. As the UK population continues to increase, I envisage performance and returns growing as healthcare services will only increase too.
For any REIT I consider buying, I look at levels of returns. Assura’s current dividend yield stands at 4.5%. This is double the FTSE 250 average of just under 2%.
Finally, at current levels, Assura shares look decent value for money on a price-to-earnings ratio of just over 11.
To summarise, I would add Assura REIT shares to my holdings to boost my passive income. Its current yield, performance track record, as well as defensive traits help me come to my decision.