Higher interest rates have been a gift to income-seeking investors in one unlikely corner of the market: real estate investment trusts (REITs). And for investors willing to do a little digging, some genuinely compelling opportunities have emerged from the rubble.
Primary Health Properties (LSE:PHP) is one potential example. With a 7.4% dividend yield and 30 consecutive years of progressive dividend growth, it has one of the most impressive income track records on the entire London Stock Exchange.
So can the business continue to grow the dividend from here? And is this currently ignored income stock a no-brainer buy right now? Let’s take a closer look.
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.
Why is Primary Health Properties special?
As a quick introduction, Primary Health Properties is the UK’s largest listed healthcare REIT, owning a £6bn portfolio of GP surgeries, primary care centres, and private hospitals across the UK and Ireland. And that makes it a rather unique business.
The vast majority of the firm’s income stems directly from the NHS and the Irish Health Service. Those are both government-backed tenants with virtually zero credit risk and essentially no vacancy risk.
What’s more, despite what the recent share price performance might suggest, the latest trading update has confirmed that operations remain in a healthy shape.
Organic rental growth from rent reviews reached 3.4% on an annualised basis in the first quarter of 2026 compared to 3.2% last year. And as such, the group’s total contracted rent roll now stands at £345m a year, paving the way for yet another 2.8% increase in dividends.
Management has explicitly committed to maintaining its progressive dividend policy. And just earlier this month, the firm also completed a significant debt refinancing scheme, locking in £800m of fresh capital around 40 basis points cheaper than its original debts.
In other words, a large chunk of Primary Health’s outstanding loans just got cheaper to service. And that provides some lovely financial flexibility to reduce leverage in the long run, while also providing space for even more dividend growth.
What to watch
While the refinancing progress is definitely encouraging, debt remains a significant elephant in the room. Primary Health Properties’ merger with Assura in 2025 helped create the largest healthcare REIT in the country. But it came at a significant financial burden, and even after refinancing, the group’s leverage remains substantial.
Management’s loan-to-value target range of 40%-50% hasn’t yet been reached. And until the balance sheet is strengthened further, the amount of excess cash flow available to reward shareholders with even bigger payouts over time will be restricted.
So far, the company appears to have a good handle on things. But if the war in the Middle East continues to escalate and the subsequent energy inflation pushes interest rates back up, the bottom line may quickly feel the squeeze.
What’s the verdict?
Primary Health Properties isn’t a get-rich-quick story. It’s a steady, government-backed income machine that has quietly raised its dividend every single year for three decades.
So for patient income-focused investors willing to take on the risk of a leveraged balance sheet, this healthcare landlord could be worth mulling.
But outside the FTSE 250, there could be an even more exciting income opportunity for investors to explore…
What income stock do we like better than Primary Health Properties Plc right now?
One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.
And the best bit is that you can see if for yourself, right now, absolutely free of charge!
No jargon. No hard sell. Just a clear look at an income share we think is worth your time.
Zaven Boyrazian does not hold any positions in the companies mentioned.
