Boosting my passive income stream through dividend payments is a core part of my investment strategy. I own a number of real estate investment trusts (REITs) already. Another REIT I believe could help boost my holdings is NewRiver (LSE:NRR). Here’s why.
Retail property investment
A REIT is a business set up to make money from property that will yield rental income. As a rule, REITs must return 90% of profits to shareholders as dividend payments.
NewRiver is a REIT that specialises in buying, developing, and managing retail and leisure spaces throughout the UK. These usually consist of shopping centres and retail parks that provide essential goods to local communities.
So what’s happening with NewRiver shares currently? Well, as I write, they’re trading for 86p. At this time last year, the stock was trading for 74p, which is a 16% increase over a 12-month period.
A REIT with risks
As with any dividend stock, dividends are never guaranteed. They can be cancelled at the discretion of the business at any time. This can be for a few reasons. A few that spring to mind are poor performance or an external event such as a pandemic or financial crash. Usually, when events like these occur, many businesses cancel dividends to conserve cash.
Specifically in regards to NewRiver, the changing face of retail does pose a threat to its business and investment case. The rise of online shopping, along with the technology-driven world we live in, has meant more traditional retail businesses have suffered. A lack of footfall and customers turning to online alternatives has meant many retailers have fallen by the wayside. With this in mind, NewRiver may find it struggles to fill its sites in the longer term.
The bull case and what I’m doing now
So to the positives then. I note that NewRiver has had a new lease of life under new CEO Allan Lockhart. He has managed to navigate the business away from potential disaster by streamlining operations, paying down surging debt levels, and restoring its dividend. He decided to streamline by selling some of its unprofitable locations. My research indicated that NewRiver’s occupancy rate is over 95% and rental rates continue to rise.
A Q1 trading update released by NewRiver at the end of July covering the period ending 30 June made for excellent reading. It confirmed that occupancy and rental collection had both increased to over 96%. Furthermore, it boosted cash flow and now has £93m at its disposal. Crucially, it also managed to secure a fixed interest rate on debt until March 2028. This means that despite interest rates rising, servicing the debt won’t become tougher for it due to its fixed rate.
NewRiver’s ongoing turnaround currently makes it seem an attractive stock to buy to boost my passive income stream. The shares’ current dividend yield stands at over 8%! This easily surpasses the FTSE 100 average of 3%-4%.
Overall, I think NewRiver could be an excellent REIT to add to my holdings. I would add some shares to my holdings and expect dividends to continue boosting my passive income for the foreseeable future.
