In recent times, I have wanted to buy UK shares with defensive characteristics as well as growth prospects. I purchased two stocks, Primary Healthcare Properties (LSE:PHP) and Supermarket Income REIT (LSE:SUPR). Here’s why.
Primary is a real estate investment trust, meaning it buys, operates, and rents out healthcare-related properties such as GP surgeries. The income it yields from these properties is returned to shareholders in the form of dividends. What I like about REITs is the fact that they must return 90% of profits to shareholders.
As I write, Primary shares are trading for 125p. At this time last year, the stock was trading for 153p. This equates to an 18% decline over a 12-month period. I’m not worried about this drop as many UK shares have fallen due to economic volatility and the events in Ukraine.
I like Primary shares as I believe their defensive capability stems from the fact that healthcare is an essential. No matter the economic outlook, healthcare will always be a basic requirement. This should mean that Primary can continue to perform, reward its shareholders, and grow.
In addition to this, Primary shares look decent value for money on a price-to-earnings ratio of 10. Furthermore, they would boost my passive income stream through dividend payments. The current dividend yield on offer stands at 4.9%. This is higher than the FTSE 250 average of 1.9%.
Despite my position in Primary shares, I am conscious of potential issues. First of all, dividends are never guaranteed. They can be cancelled at any time to help a business conserve cash. Next, Primary’s demand could be hurt by the rising demand for virtual healthcare in line with technological advancements. This could hinder future growth and returns.
Supermarket Income is also a REIT. It buys, owns, and rents out properties for supermarkets whether that’s retail locations or warehousing and operational properties.
So what’s happening with Supermarket shares currently? Well, as I write, they’re trading for 110p. At this time last year, the stock was trading for 115p, which is a 4% decline over a 12-month period.
As with Primary, I believe Supermarket’s defensive traits stem from the fact that food and consumer goods are essential. Despite what may be happening in the wider economy, consumers require basic goods, such as food and other consumables.
Reviewing Supermarket’s fundamentals, its shares also look good value for money on a price-to-earnings ratio of just 10. They would also boost my passive income stream as well. Supermarket’s current dividend yield stands at 5.1%, considerably higher than the index average.
Looking at potential challenges that could derail Supermarket shares, there are again similarities. With the rise in technology, online shopping delivered directly to your door has taken off in recent years. Ocado is a big player in this market but other traditional retailers have also begun offering this too. This could result in Supermarket experiencing less demand for its properties. As a result, this could hinder performance, growth, and returns.
In conclusion, I believe both of these UK shares will boost my holdings for a long time to come. As well as their favourable fundamentals currently, their defensive traits ease any concerns around the risks noted.
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Jabran Khan has positions in Primary Health Properties and Supermarket Income REIT. The Motley Fool UK has recommended Primary Health Properties. 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.