The Motley Fool

2 cheap UK passive income shares I’m hoping to buy in 2024!

Story by Royston Wild  

The London stock market underperformed in 2023 as worries over the political and economic landscape sapped market confidence. But these troubles haven’t deterred me from investing. I’ve continued to buy UK shares of late, and plan to keep adding to my portfolio during the new year.

One reason is I buy shares for the long haul. I invest according to the returns I can expect to make over several years, meaning that an uncertain outlook in 2024 isn’t enough to put me off.

It’s also because many top British stocks now offer exceptional all-round value. Recent share price weakness leaves stacks of quality companies trading on low earnings multiples and carrying mighty dividend yields.

Here are two UK stocks I’m hoping to add to my Stocks and Shares ISA at the next opportunity.

The PRS REIT

While the British economy faces an uncertain outlook in the new year, the highly defensive operations of residential landlord The PRS REIT (LSE:PRSR) means it should continue paying above-average dividend income.

City analysts agree, and for this financial year (to June 2024) the business carries a healthy 4.6% dividend yield. This solid yield is also underpinned by REIT rules that specify at least 90% of rental profits must be distributed in the form of dividends.

PRS REIT’s share price could fall again if interest rates remain well above post-2008 norms. In this landscape, net asset values (NAVs) — which edged 3% higher in fiscal 2023 — may remain under pressure. Borrowing costs would also stay at more uncomfortable levels.

Yet with inflation falling sharply, and Britain’s economy struggling to grow, the odds on Bank of England (BoE) rate cuts are rising.

I also like this property stock because residential rents are tipped to continue increasing at a strong pace. Lettings listing giant Zoopla, for instance, expects tenant costs to rise on average by 5% this year as the homes shortage rolls on.

As well as offering that large yield, PRS REIT shares trade on a price-to-earnings growth (PEG) ratio of just 0.6. Any reading below 1 indicates a stock is undervalued.

Primary Health Properties

FTSE 250-quoted Primary Health Properties (LSE:PHP) is another top-value REIT on my watchlist today. I already hold a position in this company. But its undemanding price-to-earnings (P/E) ratio of 15 times and 6.6% dividend yield for 2024 are tempting me to buy more shares.

The company has similarities to PRS REIT in that it operates in a highly defensive sector. It operates primary healthcare facilities like GP surgeries, a sector which benefits from stable demand and where rents are guaranteed by government bodies. It also stands to benefit from a likely reduction in BoE rates.

This UK share arguably also offers superior long-term growth potential, thanks to demographic changes in its British and Irish markets. Rising life expectancies means demand for medical treatment will also move higher, providing the business with excellent opportunities to boost earnings.

Primary Health Properties is tipped to have grown its annual dividend for the 27th straight year in 2023. Despite the threat of higher-than-usual build costs, it’s another great passive income stock I’d like to buy in the New Year.