When looking for passive income from dividends, my preference is usually real estate. Property prices reliably increase over time, and I can get a nice rental yield from a flat or apartment while the property appreciates in value.
However, let’s be real. Most people, including myself right now, can’t afford to buy a flat or house outright and start charging rent. Maybe one day, but it’s a way off at the moment. Thankfully, there’s still a way I can get a slice of the action, which is through real estate investment trusts (REITs).
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Storage REITs are my favourite
Even if I did have the money to buy an apartment or house outright to rent out, I probably wouldn’t do it. Here’s why.
First of all, that would arguably take up most of my money. It would make more sense for my long-term future to build a diversified investment portfolio full of wonderful corporations and hold some REITs within that portfolio. That way, I can generate some healthy dividends from property while still getting a slice of businesses that aren’t involved in real estate.
There are plenty of wonderful REITs out there, but I like storage property companies. The reason is that they are reliably less prone to recessionary pressures. Also, the maintenance fees for storage units are usually lower than living accommodations because people aren’t living in them all year round. They’re just storing their goods for when they need them.
And one of the storage REITs that I’m considering investing in is Safestore (LSE:SAFE).
What I admire about the business
Safestore operates in six countries, but most of its revenue comes from UK storage units. It’s a simple business, and I usually like that. Warren Buffett always teaches that we should invest in what we know. Thankfully, I think most people can get their heads around storage units.
Safestore is growing really fast. Management has even stated in its 2023 annual report that the storage unit industry could be viewed as still immature. That’s good for investors because it means the popularity of storage could increase over time, and shareholders would profit handsomely from the growth.
Assessing the opportunity
At the moment, Safestore shares are down around 45% in price, and the dividend yield is almost 4%. Additionally, over the past 10 years the firm’s share price has grown around 250% in price. I think all of those elements combined show a really compelling opportunity for me.
But there’s also a fair amount of growing competition. The most notable competitor is Big Yellow Group. The two firms have a little bit of a rivalry going on. If Big Yellow expands more aggressively over the long term, it could end up being able to offer more competitive pricing. That could, in turn, reduce Safestore’s value in the market and affect shareholder returns.
However, I think Safestore’s market position is relatively safe for some time yet. So, I’ll be looking at investing in it soon.
The post Down 45% in price with a 4% yield, I think this is an intelligent passive income investment appeared first on The Motley Fool UK.
Pound coins for sale — 31 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
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Oliver Rodzianko has no position in any of the shares mentioned. The Motley Fool UK has recommended Safestore 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.
