I love shopping for passive income stocks when they’re on sale. Following recent market volatility — not to mention years of underperformance before that — many top dividend heroes can be picked up on rock-bottom prices.
Take Grainger (LSE:GRI) and Unite Group (LSE:UTG). These two dividend shares carry ultra-low valuations, yet have brilliant records of delivering passive income.
So why are they trading so cheap? And why should investors consider buying them today?
Dividend hero
Grainger is a dividend machine. It’s grown dividends in nine of the last 10 years. For 2026, its dividend yield is 5.6%, smashing the FTSE 100 average of 3.1%.
So why are its shares trading so cheaply? It comes down to interest rate expectations as inflation rises. Borrowing costs could leap, hitting earnings and impacting its growth strategy. Property valuations will also be hit if the Bank of England raises rates.
But in my view, Grainger shares are too cheap. It trades on a forward price-to-earnings (P/E) ratio of 7.8 times. Meanwhile, its price-to-book (P/B) sits at 0.6 — at below 1, the stock trades at a discount to the value of its balance sheet assets.
What I need to know is whether this real estate investment trust (REIT) can still be a reliable source of dividends. I think it can, thanks to its focus on the defensive residential property market.
It’s not just that demand for houses remains unaffected by economic conditions. Its that there’s a chronic shortage of quality rental properties in the UK. And with the national population also soaring, I’m confident rental income — and with it Grainger’s earnings and dividends — should keep rising strongly. Like-for-like rents increased 3.1% in the four months to January.
I expect Grainger’s share price to recover strongly over time. Meanwhile, it should keep delivering juicy dividends thanks to sector rules. REITs like this must pay at least 90% of yearly rental profits out to shareholders.
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A 7.8% opportunity?
Unite is another REIT with a long record of dividend growth. Again, it has had nine annual increases in the past 10 years. Its dividend yield for this year is an even-more impressive 7.9%.
So what’s the story here? Like Grainger, it’s slumped due to concerns over future interest rates. But that’s not all. This dividend stock provides university accommodation, so has suffered as more students have chosen to live at home to save money.
Unite’s share price drop now leaves it on a forward P/E ratio of 8.1 times. It represents a great dip buying opportunity for investors to consider.
Why? The long-term outlook for the student accommodation market remains as robust as ever. The UK remains a hugely popular hub for international students, and Unite’s focus on the most popular locations and respected universities sets it up well for long-term growth. Think towns and cities like London, Bristol, Nottingham, and Manchester.
One final thing: Unite has a robust development pipeline too to capitalise on this opportunity. This should create a whopping 10,000 beds for delivery over the next five years
