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Growing a passive income stream is an important aspect of my investment strategy. Here are two stocks I currently own to do just that. However, I must remember that dividends are not guaranteed.
Both stocks are real estate investment trusts (REITs). These are companies established to earn income from property. I like REITs because 90% of profits must be returned to shareholders.
It is the first collection Warehouse REIT (LSE:WHR) specializes in buying, renovating and leasing warehouse space to other businesses, particularly for their e-commerce needs.
So what’s happening to Warehouse shares right now? Well, as I write, they are trading at 150p, which is exactly the same as last year. I note that since July the shares have risen 8% from 138p to current levels. I believe the shares have risen due to the acquisition, the dividend announcement and the announcement of a new warehouse in Crewe.
So let’s look at what attracted me to Warehouse stocks. The shares are currently good value for money with a price-to-earnings ratio of just under 4.5, and a dividend yield of close to 4.5%.
Finally, Warehouse has a good track record of performance. I know that past performance is no guarantee of the future. However, in retrospect, he realizes that revenues and profits have grown over the past four years. Performance growth supports dividends that grow my passive income stream.
Despite my position in Warehouse stocks, I should note potential downside risks. First, warehousing has benefited from a lack of quality warehouse space. If supply and demand converge, I can’t help but think Warehouse could see performance and dividends.
Next is stock. Regional REIT (LSE:RGL) focuses its operations on commercial properties such as office buildings and industrial sites located outside the M25 motorway.
So what’s happening to the stocks right now? As I write they are burning at 70p. This time last year the stock was trading for 83p, so it represents a 15 per cent drop over the 12-month period. Due to the macroeconomic headwinds, as well as the tragic events in Ukraine, my small income reserves have retreated.
A bull case for regional stocks comes with a dividend yield of 9.5 percent. This is high FTSE 100 Average 3% – 4%. And the shares are better value for money because of the pull back in price. They currently trade at a price-to-earnings ratio of 10.
Finally, Regional also has a consistent performance record. It has recorded consistent revenue and profit over the last four years.
Therefore, regional shares bear aspects. I believe the biggest issue will be high inflation which will result in high costs for the businesses renting the buildings. Could these costs get to the point where businesses close or struggle to pay the rent? If that’s the case, my performance and any passive income I think I’m making could suffer.
Despite the downside, I bought shares in both companies to buy and hold for the long term. I believe they will provide consistent and profitable income for my holdings.