What do Britain’s 4,850 “ISA Millionaires” have in common ?
First, many are using Stock & Shares ISAs to save – collecting dividend income and potential capital gains tax free.
Second, they seem to prefer dividend paying shares.
Here’s a list of their top holdings – according to Hargreaves Lansdown:
Legal and General Group Plc Phoenix Group Holdings Plc Aviva Plc IG Group Holdings Intercede Group Plc Beeks Financial Cloud Group BP Plc Rio Tinto M&G Michelmersh Brick Holdings
And, as many ISA millionaires will tell you, you can reinvest your tax-free dividends, snowballing wealth over the long-term. I’d argue it’s the big secret of Britain’s “ISA millionaires.”
REITs often have higher-than-average dividend yields compared to other stocks, making them a solid choice to consider for passive income investors.
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Real estate investment trusts (REITs) offer a combination of high dividend yields, potential for growth, and diversification benefits, making them an attractive option to consider for investors seeking passive income.
Here are a handful owned across the Fool.co.uk contract writing team!
Primary Health Properties
What it does: Primary Health Properties specialises in purchasing and renting primary healthcare facilities within the United Kingdom and Ireland.
By Mark Hartley. Primary Health Properties (LSE: PHP) is a real estate investment trust (REIT) that benefits from stable revenue through long-term leases backed by the NHS and Irish government. This makes it a good candidate for passive income, as it’s low-risk and provides consistent dividend payouts
It has a long track record of dividend growth and has seen moderate price appreciation during strong economic periods. Dividends have increased consistently for over 20 years at a compound annual growth rate of 3.24%.
However, the price has suffered during periods of high interest rates, ramping up borrowing costs and impacting profitability. Recent concerns about the wider property sector and potential government healthcare policy change risk hurting the share price.
Despite a slight decline in performance over the past three years, revenue and earnings have typically been within 1% of expectations. This makes it attractive to income investors looking for stable and reliable performance.
Mark Hartley owns shares in Primary Health Properties.
Primary Health Properties
What it does: Primary Health Properties owns and lets out medical facilities like GP surgeries in the UK and Ireland.
By Royston Wild. Primary Health Properties offers investors the dream blend of long-term dividend growth and market-beating dividend yields.
Cash rewards here have grown every year since the mid-1990s. And City analysts expect this trend to continue until at least 2026, representing 30th consecutive years of rises.
As a result, the yields on Primary Health Properties for this year and next stand at 7.6% and 7.7% respectively. To put that into perspective, the current forward average for FTSE 250 stocks sits way below these levels, at 3.4%.
This REIT’s dividend durability reflects its focus on the ultra-defensive healthcare market, providing profits stability across the economic cycle. It’s also because the lion’s share of rental income is directly or indirectly guaranteed by a government body.
Looking ahead, future dividends could be hurt by NHS policy changes that impact earnings. But with successive governments working to strengthen the role of primary care in Britain, the outlook here for the short-to-medium term at least looks pretty solid.
Royston Wild owns shares in Primary Health Properties.
Supermarket Income REIT
What it does: Supermarket Income owns a £1.8bn portfolio of 74 stores, with the majority leased to Tesco and Sainsbury’s.
By Roland Head. Big UK supermarkets have regained their status as desirable retail properties since the pandemic. I added Supermarket Income REIT (LSE: SUPR) to my portfolio in July 2024, tempted by the 8%+ dividend yield and near-20% discount to book value.
Admittedly, there’s a risk that higher interest rates will put pressure on the dividend. But my sums suggest that this REIT will be able to refinance while maintaining its dividend.
Recent changes should deliver a sharp drop in management costs. This REIT also benefits from long leases and very reliable tenants. Occupancy is 100% and so is rent payment.
Property valuations also seem realistic – another area of possible concern. During the second half of 2024, Supermarket Income sold Tesco’s Newmarket store back to the retailer at a price 7.4% above its latest book value.
With a forecast yield of 8.3%, I’m quite happy to sit back and collect my quarterly dividends.
Roland Head owns shares in Supermarket Income REIT.
Warehouse REIT
What it does: Warehouse REIT owns and leases a portfolio of well-positioned warehouses across the UK catering primarily to the e-commerce industry.Zo
By Zaven Boyrazian. In a world where e-commerce continues to slowly take market share from brick-and-mortar retail, demand for well-positioned warehouses is growing. This is a trend that Warehouse REIT (LSE:WHR) has been busy capitalising on since its IPO in 2017.
However, with interest rates rising rapidly in 2022, real estate investment trusts have had to endure much higher financial pressures. In the case of Warehouse, that ultimately culminated in property disposals to keep debt in check.
Despite this, dividends have kept flowing. And while elevated interest rates are still a cause for concern, the sell-off by investors seemed a bit overblown. It seems the private equity markets have also come to the same conclusion since acquisition offers began flying in February 2025. So far, they’ve all been rejected.
Even after the recent rise in stock price, the shares continue to offer an attractive 6.5% dividend yield. And with demand for warehouses unlikely to slow down in the long run, the passive income potential for Warehouse REIT continues to look rock solid, in my opinion.
By a simple re-investment strategy, you would have achieved the holy grail of investing where you can take out your stake and receive income on a Trust that sits in your account at zero, zilch, nothing.
You could either spend your stake or re-invest it in the market and try to do it all over again.
Dividend Announcement
The Directors of TwentyFour Income Fund Limited (“TFIF”), the FTSE 250 listed investment company targeting less liquid, higher yielding UK and European asset-backed securities, have declared that a dividend will be payable in respect of quarter end 31 December 2024 as follows:
Ex Dividend Date 16 January 2025
Record Date 17 January 2025
Payment Date 3 February 2025
Dividend per Share 2.00 pence per Ordinary Share (Sterling)
Current yield 8.9%
Current discount to NAV 1.3%
The final dividend announced this month usually includes any surplus cash, if there is any, making it an enhanced dividend.
The emotional benefits of dividend re-investment. In fact, with this investment strategy you can actually welcome falling share prices.
There seems to be some perverse human characteristic that likes to make easy things difficult. WB
Whilst all days are good days to have a dividend re-investment plan, including weekends and holidays, some trading days are much better days than others.
Is a £333,000 portfolio enough to retire and live off passive income?
A third of a million pounds can generate a serious amount of passive income, but relying on this sum alone for retirement would be risky.
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You’re reading a free article with opinions that may differ from The Motley Fool’s
Many investors dream of becoming stock market millionaires to retire early and live off the passive income generated by their portfolios. For instance, an average 4% dividend yield across a diversified mix of dividend shares would produce a healthy £40,000 in cash payouts each year from a £1m portfolio.
But, could this goal be achieved with a more modest sum? How about nearly a third of that glorious £1m mark? That’s a challenging conundrum. An investor with a very spartan lifestyle might make it work, but most have some expensive commitments or want a few more luxuries than beans on toast every night.
So, let’s look at what a £333,000 portfolio could realistically generate in passive income.
Extra cash, but don’t quit work yet
The passive income a stock market portfolio can produce hinges on its average dividend yield. This can frequently change. Companies often cut, cancel, or suspend dividend payments due to challenging circumstances or evolving priorities. A recent example was the Covid-19 pandemic, when many businesses halted shareholder payouts.
Relying on the income produced by a £333,000 portfolio alone leaves little leeway. This raises the risks for investors who think it’s a sufficiently large nest egg to leave their jobs and sail off into the sunset.
For instance, the average dividend yield for FTSE 100 shares is currently 3.52%. If our theoretical investor’s portfolio matched that, they’d earn £11,721.60 in annual shareholder distributions. That’s a tidy sum, but it’s well below the National Minimum Wage for a full-time worker.
That said, investing in some of the highest-yielding UK shares could boost an investor’s passive income earnings. At a punchier 8% average yield, a £333,000 portfolio could produce £26,640 in annual dividends. Now, that’s more like it !
However, investors lured by the appeal of high-yield shares risk falling into dividend traps. Some market-leading payouts are unsustainable, particularly when they’re funded by debt or a business has cash flow difficulties.
For extra comfort, I’d want to spend a bit longer on the treadmill and fatten my portfolio with a decent buffer. Fortunately, at a third of a million pounds, compound returns really start to kick in. By reinvesting dividends into more stocks, investors can accelerate the process further.
A high-yield stock to consider
For those unsatisfied with the FTSE 100 average, the index offers several attractive high-yield candidates. One worth considering is Land Securities sports a juicy 7.3% yield.
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
This Real Estate Investment Trust (REIT) offers investors exposure to commercial property spanning offices, retail, and leisure spaces. It’s made a remarkable recovery from the pandemic as office working makes a comeback. Impressively, occupancy for its central London portfolio hit 97.9% in its first-half results.
Despite this, the group’s keen to pivot to growth opportunities in residential property and shopping centre acquisitions. It’s aiming for a 20% uptick in earnings per share from 50p to 60p by 2030. Landsec’s purchase of a 92% stake in Britain’s largest open-air shopping complex, Liverpool ONE, is a testament to these efforts.
Forecast dividend cover of just 1.2 times earnings is below the two-times safety threshold for reliable passive income. If the company encountered financial difficulties, a dividend reduction could be on the horizon. Nevertheless, Landsec’s near-term future looks bright for now.
Supermarket Income REIT plc (LSE: SUPR), the real estate investment trust with secure, inflation-linked, long-dated income from grocery property, has today declared an interim dividend in respect of the period from 1 January 2025 to 31 March 2025 of 1.53 pence per ordinary share (the “Third Quarterly Dividend”).
The Third Quarterly Dividend will be paid on or around 23 May 2025 as a Property Income Distribution (“PID”) in respect of the Company’s tax-exempt property rental business to shareholders on the register as at 25 April 2025. The ex-dividend date will be 24 April 2025
Buy shares that pay a dividend and use those dividends to buy mores shares that pay a dividend.
Any share that drastically alters it’s dividend payment must be sold, even at a loss.
Remember the Rules.
The Snowball invests in mainly Investment Trusts as most Trusts that have reserves that can be used to ensure the dividend is paid in times of market stress.
Residential Secure Income PLC on Friday said it has achieved the full divestment of its local authority portfolio as it presses ahead with realisations for its remaining assets.
The investor in retirement living and shared ownership said it was committed to “driving earnings growth” as it reported 99% rent collection throughout the three months to December 31. It also reported rental growth of 3.3% on 472 properties, reflecting 25% of its portfolio.
Total EPRA return for its first-quarter fell 5.5%, said the firm, giving EPRA net tangible assets per share of 69.6 pence at December 31, down 6.7% from 74.6p at September 30.
It added that its valuation decline over the period was driven by the impact of rising government bond yields.
The investment trust also reported progress with the continued realisation of the assets in its portfolio, noting that 99.7% of shareholders voted in favour of a managed wind-down and portfolio realisation strategy at its general meeting in December.
It said the full divestment of its local authority portfolio was realised in January,
with the remaining asset sold for net consideration of around GBP15.0 million, marginally above the carrying values in March last year and September 2023.
With regard to its remaining assets, Residential Secure Income noted that it has completed the tender process to select key sales agents and advisers to assist with the sale of the assets, adding that the formal launch timing of the sale of the assets is being evaluated to ensure maximisation of shareholder returns.
The firm also declared an interim dividend of 1.03p, flat with the previous year’s figure.
Its shares were 2.1% at 59.00p on Friday afternoon in London.
Chair Rob Whiteman said: “Both the investment manager and the board remain focussed on driving earnings growth, as evidenced this quarter through high levels of rent collection, sustained record occupancy and rent growth, while balancing maximising returns for shareholders with timing of disposals, ensuring the interests of our residents are protected throughout.”
Even the global financial crisis couldn’t tarnish this trust’s premium.
This debt-seeking vehicle treads where others dare not James Carthew
Questor is The Telegraph’s stockpicking column, helping you decode the markets and offering insights on where to invest.
Debt is huge across investment companies right now – in a good way. Trusts offering access to this sector come with the obvious attraction of rising dividends, which have been buoyed thanks to higher interest rates. Better still, the dividend yields on these trusts are well ahead of those that an investor would receive from a government bond, but achieving this requires taking on additional risk in some form.
While many managers rely on leverage to achieve the desired result, CQS New City High Yield Fund looks for debt issues that would normally be considered too small for most debt investors and those that have not been assessed by a credit rating agency. These relatively overlooked issues tend to trade on higher yields, but require the manager to run its own credit assessments to ensure the yields on offer are not too good to be true.
The trust pays a quarterly dividend and can boast a track record of increasing dividends every year since its inception more than two decades ago. The trust’s financial year runs to June 30, and at the interim stage the board said that it thought this year’s dividend would be covered by earnings.
In addition to providing a high yield, preservation of capital is an important part of the investment objective and to that end the manager’s approach is conservative.
The team is headed up by Ian Francis, who brings more than three decades of experience and can draw on the substantial resources of Manulife CQS Investment Management’s credit analysis team. The portfolio is fairly diversified, with exposures to more than 100 different issuers, but thanks to the detailed research of his team Mr Francis is comfortable with a high concentration of roughly 40pc of assets in the 10 largest positions.
Some of the names in that list will be familiar: Co-op Bank, Virgin Money and Barclays. Some of the more unusual ones are subsidiaries of more well-known brands. For example, other top 10 positions are TVL Finance, which issues debt on behalf of Travelodge, and Galaxy Bidco, a financing arm for Domestic & General Insurance and a longstanding position in the portfolio.
The overall bias is to sterling-denominated issues, which comprise more than 70pc of the portfolio. Some readers may be comforted that just 16pc of the portfolio was exposed to US dollars at the end of December 2024, given President Trump’s ambition to weaken the currency.
The portfolio also includes some exposure to preference shares, convertibles and high-yielding equities (about 13pc of the trust at end January 2025). At the end of 2024, there was a position in NextEnergy Solar Fund, which is trading on a yield of 12.4pc, for example.
CQS New City High Yield has peers with higher returns, but these tend to come with higher Nav volatility. It has built up a loyal fanbase and, if you are already a shareholder in the trust, you are probably happy to hang on. However, new investors will have to stomach the premium that the shares trade on.
CQS New City High Yield Fund’s shares have traded at a premium to net asset value for almost all of the trust’s life, even during 2008’s financial crisis, reflecting the impressive work of the manager. Notable exceptions were the Covid panic five years ago, when the discount briefly breached 18pc but returned to a premium a few days later, and the early part of 2021. It is worth remembering that five-year performance figures are currently misleading, thanks to the Covid anniversary.
The 2021 event was significant because this was the point when some investors began to suspect that we were headed for higher inflation, which began to show up in the figures in April of that year – higher inflation meant higher interest rates were on the way. In the long run, that would be good for trusts like CQS New City High Yield as it fed through into the revenue account, but in the short term it meant higher yields and lower prices for the debt in the portfolio.
To mitigate against the risk of this the manager keeps the duration of the portfolio (a measure of time-weighted cashflows) relatively low. Issues with long maturities tend to be more volatile.
Mr Francis feels there is a risk that the UK economy enters a period of stagflation this year, and believes further UK rate cuts are possible. However, with the increasing likelihood that interest rates will stay higher for longer (or, perhaps more accurately, a return to conditions that prevailed over the decade before the financial crisis), Questor feels that CQS New City High Yield Fund will continue to offer attractive long-term returns.
