Image Alt

The Investing Box

  /  Editor's Pick   /  With a spare £1,000, I’d boost my passive income with these FTSE 250 dividend stocks

With a spare £1,000, I’d boost my passive income with these FTSE 250 dividend stocks

Passive income text with pin graph chart on business table

I think there are some great opportunities in FTSE 250 stocks at the moment. There are two in particular that stand out to me as stocks to buy for long-term passive income.

Both are in the real estate sector, where share prices have been falling faster than the broader market. In some cases, this seems like an overreaction to me, so I’m looking to take advantage.

Property stocks

In the real estate sector, share prices are down around 8% since the start of the year. This is significantly more than the the FTSE 100 (down 1%) and the FTSE 250 (down 2%).

The biggest reason is the rise in interest rates, from 3.5% at the start of the year to 5.25% today. This has been weighing on the demand side of the property market by making mortgages more expensive.

Despite falling demand, supply in the property sector (measured by UK Construction PMI) has been relatively stable. As a result, prices have been falling.

This is why share prices in the property sector have been coming down. But I think the declines in some cases might be excessive, especially in two FTSE 250 stocks.

Primary Health Properties

First on my list is Primary Health Properties (LSE:PHP), which leases GP surgeries and health centres in the UK and Ireland. The stock is down 17% since the start of the year.

With 99.6% of properties occupied and 98% of scheduled rent collected, things are going well. And with 89% of its rent coming from the UK government, the risk of tenants going bankrupt seems low.

The bigger risk, in my view, is the company’s balance sheet. The business has £1.3bn in total debt and pays £40m in interest payments, which accounts for a lot of its £75m annual rental income. 

Event for a real estate investment trust (REIT), that’s a lot. But with 97% of the company’s debt fixed or hedged for the next seven years, I think there’s still a way to go before any real problems emerge. 

As a result, the 7% dividend looks like an attractive source of passive income. If I had a spare £1,000 to invest, I’d put £500 into Primary Health Properties to pick up an extra £35 each year.

Warehouse REIT

Another FTSE 250 REIT on my radar is Warehouse REIT (LSE:WHR). The company owns and leases industrial distribution facilities and the stock is down 22% since the beginning of January.

Around 96% of the company’s buildings are occupied and 99% of scheduled rent was collected last year. In my view, the biggest risk comes from its tenant base.

Warehouse REIT’s largest tenant is Amazon. My concern is this isn’t going to be an easy company to negotiate rent increases with, especially with a lot of warehouse space on the market.

Offsetting this risk, though, is the fact that Warehouse REIT owns properties in good locations. This provides some difficulty for tenants when it comes to switching to a different facility.

Warehouse REIT shares also come with a 7% dividend. At today’s prices, I’d be happy taking £500 and buying shares to add to my passive income.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

The post With a spare £1,000, I’d boost my passive income with these FTSE 250 dividend stocks appeared first on The Motley Fool UK.

Don’t miss this top growth pick for the ‘cost of living crisis’

While the media raves about Google and Amazon, this lesser-known stock has quietly grown 880% – with a:

  • Greater than 20X increase in margins
  • Nearly 60% compounded revenue growth over 5 years – more than Apple, Amazon and Google!
  • A 3,000% earnings explosion

Of course, past performance is no guarantee of future results. However, we think it’s stronger now than ever before. Amazingly, you may never have heard of this company.

Yet there’s a 1-in-3 chance you’ve used one of its 250 brands. Many are household names with millions of monthly website visitors, and that often help consumers compare items, shop around and save.

Now, as the ‘cost of living crisis’ bites, we believe its influence could soar. And that might bring imminent new gains to investors who’re in position today. So please, don’t leave without your FREE report, ‘One Top Growth Stock from The Motley Fool’.

Claim your FREE copy now

setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#FFFFFF’);

More reading

  • I’d invest my first £1k in this high dividend yield stock today
  • 7%+ dividend yields! 2 cheap FTSE 250 stocks I’d buy for passive income
  • Best British dividend stocks to buy in August
  • 2 dividend shares for August that aren’t banks or mining stocks
  • Forget buy-to-let! This property investment offers an 8% dividend yield

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Stephen Wright has positions in The Motley Fool UK has recommended, Primary Health Properties Plc, and Warehouse REIT Plc. 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.