Real estate investment trusts (REITs) have fallen out of fashion since interest rates climbed sharply from 2022. With yields on cash accounts and government bonds suddenly competitive, the appeal of owning property through the stock market faded fast, and share prices followed.
But here’s the thing. Elevated interest rates have also pushed some genuinely high-quality REITs to historically cheap valuations. And for income investors willing to look past the macro noise, that creates a rare and potentially lucrative passive income opportunity.
That’s why I’ve already taken advantage.
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A dividend record that speaks for itself
The REIT I’ve added to my income portfolio is Safestore Holdings (LSE:SAFE). It’s the UK’s largest self-storage group with 21 units spread across the UK, France, Spain, the Netherlands, and Belgium.
What originally caught my eye was the dividend record. Safestore has grown its dividend every single year for 16 consecutive years, at an average annualised growth rate of 12.9%. That’s a genuinely exceptional track record for any income stock, let alone one in real estate.
The result? A 5% dividend yield that’s near its highest point since 2013. In other words, patient investors are now being paid more to own Safestore than at almost any point in the last decade!
Is it too good to be true?
Earlier this month, the company published its latest interim results for its 2026 fiscal year (ending in October). And the numbers confirmed that the business continues to be on track even with a seemingly soft share price.
Group revenue climbed 6.9% to £120.6m, underlying profit before tax grew 2.3% to £44.6m, and adjusted earnings per share (EPS) rose 2.1% to 19.4p. Those numbers aren’t explosive. But it shows that even in a tough operating environment, Safestore continues to deliver steady and resilient growth, hiking dividends yet again.
Looking ahead, the group’s European expansion is the most exciting part of the growth story. Expansion Markets, covering Spain, the Netherlands, and Belgium, delivered revenue growth of 25.7% in the first half, with like-for-like revenue surging 16.8%.
So what’s the catch?
The European expansion, while exciting, carries significant execution risk. Opening new facilities in multiple continental markets simultaneously is a complex operation. Paris, for example, saw like-for-like occupancy dip slightly in the first half as new units cannibalised nearby existing sites before building their own customer base.
Suppose this pattern repeats across Spain or the Netherlands? In that case, the near-term earnings growth could disappoint.
Interest rate sensitivity also remains a real risk. Underlying net finance costs are expected to increase by £2m-£3m in the second half as floating rates remain elevated. And the Loan-to-Value (LTV) ratio has crept up to 29.1% as development spending continues.
To be clear, that’s still a manageable amount of gearing. But if debt becomes more expensive and property valuations tumble, the balance sheet could start to look stretched.
The bottom line
Safestore’s not a flashy growth story. It is a disciplined, cash-generative business with 16 years of unbroken dividend growth, a proven expansion playbook, and a yield at its most attractive in over a decade.
For patient long-term investors, that combination is hard to ignore. And it’s exactly why I’ve added this REIT to my passive income portfolio.
Should you invest £5,000 in Safestore Plc right now?
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Zaven Boyrazian owns shares in Safestore Holdings.
