With this being the case, I think investors would do better to look to publicly-traded real estate investment trusts (REITs) instead of rental property if they want to invest in the sector. Today, I’m going to outline two REITs I think could be great alternatives. 

Office income

My first pick is office owner Regional REIT (LSE: RGL). As its name suggests, the company specialises in buying commercial property outside of London. Management is mainly focused on buying office buildings in areas where there’s a strong demand for such properties. Across its portfolio of 150 properties, it has 850 tenants, many of which are blue-chip businesses on 10-year-plus leases.

Regional’s tenant selection process is driven by its primary goal of generating income for shareholders from a diverse property portfolio. Since its launch in 2015, the dividend, which is paid quarterly, has risen from 7.7p to 8.3p. At the current share price, that gives a dividend yield of around 8%. On top of this, at the time of writing, the stock is trading around book value so you can buy the shares for the same price as the property portfolio is worth.

To help boost growth, the company recently completed a £62m fundraising, which was quickly snapped up by shareholders who were happy to support Regional’s growth plans.

So, all in all, you can get an 8% dividend yield from this diversified office owner without having to pay a premium to do so. I think you’d be hard-pressed to get the same kind of return from buy-to-let property in the current market.

Niche market

My second buy-to-let property alternative is healthcare REIT Assura (LSE: AGR). This business owns a portfolio of primary care medical facilities across the UK, giving it an income stream from an extremely defensive real estate portfolio in a growing market. 

People will always need to visit doctors, so there’ll always be a need for medical facilities. But the average investor can’t buy primary medical care facilities on their own and that’s why I think Assura is such an excellent investment. For around 75p, you can buy a share in this business and get a steady stream of income from medical facilities.

At the time of writing, the shares support a dividend yield of 3.8%. Over the past six years, the distribution has grown from 1.82p per share to 2.55p. And City analysts are forecasting a further 10% increase for the current financial year.

Assura’s dividend yield might be below the market average, but I think that’s a reflection of how secure this income stream is, and is a discount worth paying. That’s why I would consider this unique property business as an alternative to buy to let.

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Rupert Hargreaves owns shares in Regional REIT. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

However, while the returns available from buy-to-let property have been falling over the past decade, yields on real estate investment trusts have been rising. And right now, several trusts offer dividend yields of more than 8%!

Outside London

Regional REIT (LSE: RGL) was established with the aim of building an attractive commercial property portfolio in population centres across the UK outside of the M25 motorway. Over the past five years, it has more than doubled the value of its portfolio to nearly £500m through the issue of new shares and debt. 

It does not look as if the enterprise is going to slow down any time soon either. Regional’s focus on out-of-town business centres, warehouse facilities and offices has helped the company ride out the storm on the high street, and the demand for its properties is booming.

Back in June, the firm announced a series of lettings to new and existing tenants with an average rental uplift of 11.6%. Only a few weeks before this series of transactions was announced, Regional informed investors that it had agreed to sell a building in Sheffield 25% above its book valuation (as at December 2018). Today the company published a further positive trading update, informing investors that it has inked £1.3m of new lettings with a “major uplift” in income for the group. 

To capitalise on the opportunities available in regional property markets, last month it announced a £50m placing at a 7% discount to the market price to raise money for further deals.

When these new properties start to contribute to the bottom line, City analysts reckon Regional will have the ability to pay out 8.26p per share in dividends for 2019, giving a dividend yield of 8% at the current price. Based on its track record of creating value for shareholders, I think it’s worth snapping up this income champion today. 

Value opportunity 

If you’re looking for property income, I also highly recommend checking out NewRiver REIT (LSE: NRR). Shares in NewRiver have come under pressure over the past two years due to the company’s exposure to the retail property market.

The firm’s critics believe that the group’s 33 community shopping centres, and 23 “conveniently located” retail parks will suffer as consumers continue to move away from bricks-and-mortar shops, and, as a result, NewRiver will have to mark down the value of its assets and possibly cut its dividend.

I think it is unlikely NewRiver will cut its dividend. But, if it does, with a dividend yield of 14% at the time of writing, even a 50% cut would leave the company yielding a highly attractive 7%.

On top of this, the stock is trading a price-to-book value of just 60%. This implies the market believes its property portfolio is worth 40% less than NewRiver is saying it is. That might be the case, but I think the market is assuming the worst-case scenario. If the worst case never happens, this could be an excellent opportunity for savvy value investors.

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Rupert Hargreaves owns shares in Regional REIT. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

However, it’s not the only stock with an impressive income investing outlook. Reporting on Tuesday was a stock that currently offers a dividend yield of 8%, and which could be worth buying alongside HSBC for the long term.

Improving outlook

The high-yield share in question is Regional REIT (LSE: RGL). The real estate investment trust (REIT) released half-year results on Tuesday which showed it has made a number of disposals during the period. In fact, it disposed of £60.4m in assets at an average net yield of 4.9%. The company took advantage of the mismatch between valuations and market demand, or completed business plans for more mature assets. As such, it made acquisitions totalling £40.1m, which offer significant asset management opportunities to increase value.

The company’s £50m raising through a retail bond provides it with the capacity to invest further in the next stage of its development, as well as capitalise on further opportunities in the regional property market. This suggests that it could have a bright future at a time when the commercial property sector appears to offer good value for money.

With Regional REIT having a dividend yield of around 8.3%, it seems to offer impressive income potential. The stock also appears to have a wide margin of safety, which could mean that its total returns are impressive over the long run.

Growth potential

Prospects for HSBC also seem to be positive. The company’s pivot to Asia could provide it with a significant tailwind over the next decade, with wealth and spending levels set to rise across the region. Demand for the company’s services may therefore increase, with the investment it’s making in its product offer likely to add a further catalyst to its earnings growth potential.

Higher earnings could, of course, lead to rising dividends in the long run. At the present time, the stock has a dividend yield of around 6.1%. Since dividends are currently covered 1.5 times by profit, there could be significant scope for them to rise over the coming years – especially if the business enjoys improving operating conditions.

With HSBC forecast to post positive earnings growth in the next two financial years, its financial prospects appear to be bright. It trades on a price-to-earnings (P/E) ratio of around 13, which indicates that it could offer a wide margin of safety compared to FTSE 100 sector peers. As such, now could be the perfect time to buy it, with a long-term holding period seemingly likely to provide the most appealing risk/reward ratio for investors.

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Peter Stephens owns shares of HSBC Holdings. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Pub problems

With a dividend yield of 7.8%, shares in pub group Marston’s (LSE: MARS) offer one of the highest dividend yields in the FTSE 250 (top 10).

Usually, I wouldn’t recommend any company with such a high yield as it is generally an indication that the payout is not sustainable. But with Marston’s, it is difficult to doubt the distribution. It just seems as if the market is avoiding the hospitality sector at all costs.

I reckon this view is incorrect. Looking at the underlying fundamentals of the sector, there’s still much to like. For example, despite rising wage and food/beverage costs, companies like Marson’s are managing to offset these higher input costs by cutting costs and diversifying. 

It has been investing heavily in its own beer company, acquiring brewers and distributing the products across its pub estate. Total volumes grew 46% in the 42-week period to 21 July.

Alongside these efforts, rising consumer spending has also helped to stem the bleeding. At the end of July, Marson’s reported a 5.2% increase in managed and franchised pub sales for the 42 weeks. New pubs contributed the bulk of this growth. Like-for-like sales growth was 0.3%.

Marston’s isn’t the only company reporting sales growth. Last week peer Greene King said sales expanded 2.8% on a like-for-like basis during the 18 weeks to September 2. Yes, both companies have benefited from the football World Cup, but looking at these figures it seems to me as if the hospitality industry isn’t struggling as much as some analysts seem to believe. With this being the case, I think shares in Marston’s are a steal today, changing hands at just 6.6 times forward earnings. 

So, if you are looking for a cheap income play for your portfolio, in my view, Marston’s is certainly worthy of further research.

Commercial property

If Marston’s is not your cup of tea, I’m also intrigued by commercial property play Regional REIT (LSE: RGL). 

With a dividend yield of 8.4% (on a forward basis), this company certainly looks attractive from an income perspective. But why is the market ignoring the business? Well, it is difficult to tell. Regional does have some exposure to retail properties, a sector that has had its fair share of negative headlines recently, although the company’s most significant exposures are the office and industrial market. For example, in the middle of last month, the firm announced the acquisition of eight offices located in Hull, High Wycombe, Stockton-on-Tees, Ipswich, Clevedon, Wakefield, Deeside and Lincoln for £31.4m. And today, the company told investors it has just sold an office building in Cheshunt for £17.3m, generating a profit of £3m since acquiring the site in December 2017. 

The value of, and income from, commercial property tends to be much more sensitive to economic cycles than residential property. So, this exposure goes some way to explaining the high dividend yield. That being said, the REIT’s tenant base is extremely well diversified and the average yield on its portfolio is in the high-single-digits. With this being the case, I reckon this defensive income play might be worth a closer look. 

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This edge is the group’s focus on the increasingly-popular plus-size segment. While plus-size clothing isn’t unique to N Brown, has established itself as one of the leaders in the segment. 

What’s more, the company has built its operations on a digital base, so unlike other retailers such as Debenhams, which has tremendous rent and rates obligations to meet, N Brown is better placed to succeed in a digital world. 

Online retailer 

During the last financial year, N Brown’s physical stores only generated £15m of sales, or 2% of overall group revenue. And now management is planning to shutter the 20 high street stores the enterprise does operate due to “very disappointing footfall.” The cost estimate for closing these outlets is £18m to £22m. 

Away from the high street, the group’s brands, including Simply Be and Jacamo, are still performing well. For the firm’s fiscal first quarter to June 2, total revenues rose 0.4% with online sales rising 3%. The company also benefitted from an increase in demand from consumers for financial services. Its financial services arm that lets customers borrow to finance purchases reported revenue growth of 9%. 

City analysts believe N Brown’s internet-focused business model means that the group is well placed to continue to grow earnings. Growth of 5.6% is expected for fiscal 2019 and 4.7% for 2020. The dividend is expected to tick higher from 14.2p to 14.4p by 2020, giving investors an 8% dividend yield. And as well as this high single-digit yield, the stock is also trading at a bargain basement forward P/E of 7.8 — a rare situation where the yield is higher than the valuation. 

Sector outperformance 

Regional REIT (LSE: RGL) is another 8% yielder that the market seems to be overlooking. Like N Brown, shares in Regional have come under pressure recently due to retail sector woes. Falling profits on the high street are forcing landlords to accept lower rents on commercial property portfolios. However, so far Regional seems to be avoiding the worst of the decline. At the end of March, the group’s occupancy rate was 85.7% versus 85% at 31 December 2017. 

It seems the company’s focus on offices is helping it navigate volatility in the commercial property market. At the end of March, offices accounted for 67% of the portfolio, and management is making the most of the market weakness to snap up more properties on attractive terms. Between the 29 and 31 of March, management inked two sizeable acquisitions, with a net initial yield of more than 8%. 

Regional’s active portfolio management and continued high levels of occupancy suggest the company’s dividend of 8.1p per share is here to stay. At current prices, the distribution is equal to a market-beating dividend yield of 8.5%. With this level of income on offer, it’s no surprise star fund manager Neil Woodford owns a significant stake. 

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But today I want to look at two Woodford dividend stocks you might not be familiar with. Both offer above-average yields, including one staggering 8% payout. Should we be buying these shares?

Bowled over

One of the more interesting companies to float on the London Stock Exchange last year was Ten Entertainment Group (LSE: TEG). This is a 10-pin bowling group similar to Hollywood Bowl, but smaller.

The group’s shares have performed strongly since flotation, climbing by 45% to today’s price of 240p. But the valuation continues to look quite reasonable to me, so I think the shares deserve a closer look.

Sales rose by 8.9% to £71m last year, thanks to like-for-like growth of 3.6% and new openings, which added 5.3%. The group is continuing to expand and announced the acquisition of two new sites today, on leisure parks in Chichester and Warrington.

Cheap enough to play

It’s been a few years since I went bowling. But I do know that modern bowling alleys come complete with bars, restaurants and other opportunities for spending money.  This makes them quite profitable businesses. My calculations indicate the group has generated an underlying operating margin of 12.3% over the last 12 months.

Last year’s IPO enabled Ten’s management to repay most of the group’s debt, leaving net debt of just £7m at the half-year point. That’s very comfortable when set against forecasts for a 2017 net profit of £11m.

Earnings are expected to rise by about 16% to 19.1p per share in 2018, putting the stock on a forecast P/E of 12.6. A dividend payout of 11.6p per share is expected, giving a prospective yield of 4.8%. In my view, this could be an attractive income stock to tuck away.

An affordable 8% yield?

A dividend yield of 8% would normally signify a company with problems. But there are occasional exceptions to this rule. One potential example is real estate investment trust Regional REIT (LSE: RGL).

This £370m property firm owns a mix of office and light industrial properties in regional locations across the UK. It’s now in its third year of listed life. The group’s shares haven’t made much progress and currently trade a couple of pence below their listing price.

But Regional REIT’s dividend progress has been far more impressive. REITs are given tax advantages in exchange for being required to pay a large proportion of earnings to shareholders as dividends.

The group’s payout is expected to reach 7.8p per share for 2017, giving a forecast yield of 7.9%. The 2018 payout is currently expected to be 8.1p, giving a prospective yield of 8.2%.

These payouts are dependent on continued high levels of occupancy and growth in rental rates. Cheap debt is also essential — if interest rates rise then profits could fall. So far the trust appears to be handling these issues. Occupancy remained stable at around 82% during the first nine months of last year. A recent refinancing has extended the average maturity of the group’s debt from two years to 6.3 years.

If you share Mr Woodford’s view that the UK economy will remain stable, then I believe Regional REIT could be a good income buy.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Hollywood Bowl. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Today I’m going to look at two stocks which both offer dividend yields of more than 7%. If these payouts prove sustainable, these could be great Buffett-style stocks to tuck away in your portfolio.

A slice of UK plc

Regional REIT (LSE: RGL) floated in 2015 and owns a portfolio of 150 commercial properties around the UK, all of which are located outside the M25.

About 63% of sites are offices, with 26% industrial. Retail accounts for 11% and is considered non-core by the company, whose focus is on replicating the mix of businesses in the UK economy.

A safe 7% yield?

In half-year results published this morning, Stephen Inglis, Group Property Director, said that demand for office and light industrial sites was “steady” and that he expected occupancy to increase.

Operating profit excluding property gains rose from £13.4m to £14.3m during the first half. The interim dividend was increased by 2.9% to 3.6p per share.

Looking at the business, portfolio occupancy by value increased from 82.7% to 83.3%. The group’s average unexpired lease length to first break is 3.5 years. So earnings visibility should be reasonably good in the short-medium term, but is less certain after 2021.

The group’s loan-to-value ratio is fairly high at 47.3%, but this is partly the result of an acquisition in March and is expected to fall. The group is also in the process of refinancing its borrowings following this deal, which I expect will reduce interest costs.

Although Regional REIT’s rental income could be hit by a recession, the business appears to be in reasonable shape at the moment. The shares trade slightly below their EPRA net asset value of 106p and the forecast dividend of 7.9p per share gives a yield of 7.8%. Based on this valuation, I’d be tempted to have a closer look.

Double up on pubs?

Pub chains have reported mix trading conditions this year. Marston’s (LSE: MARS) is no exception. The group’s share price has fallen by nearly 25% so far in 2017. However, the latest trading update seemed cautiously optimistic to me.

Like-for-like sales were up by between 1.3% and 1.9% across its different brands, and were ahead of the market average in a number of cases.

Ralph Findlay, Marston’s chief executive, says that he remains confident of “further profitable progress” for the full year. Broker consensus forecasts suggest that the group will generate a net profit of £84.6m this year, up by around 6% on last year.

The stock currently trades on a forecast P/E of 7.4 and at 20% discount to its book value of 125p per share. A dividend of 7.55p per share is expected, giving a prospective yield of 7.3%. This payout should be covered comfortably by forecast earnings of 14p per share, but I think it looks a little stretched in terms of the group’s cash flow.

Based on the firm’s latest figures and the risk that trading conditions could get tougher, I’d probably rate this stock as a ‘hold’ until we know more.

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Convenience

NewRiver REIT (LSE: NRR) is a property investor, which owns and manages a mix of shopping centres, retail parks, high street properties and leisure assets. It has a convenience and community-led approach, with a focus on high-yielding-but-low-risk retail properties.

NewRiver’s growth track record is certainly attractive — dividends per share have grown at a compound annual growth rate of 9% over the past four years, while funds from operations (FFO) per share have increased by 11% annually over the same period.

The company released its Q1 trading update this morning which continued to highlight the progress made with its development pipeline. Planning consents for a 236,000 sq ft mixed-use development in Cowley and 38,000 sq ft hotel in Romford had been obtained, while it made further progress made on rolling out its convenience store programme.

Despite near-term economic headwinds, I reckon the REIT will continue to perform well for its shareholders. After all, CEO David Lockhart likes to remind us that the business was founded in 2009 during a severe recession, and in spite of this, it has grown into a FTSE 250 entity in less than eight years. Also, rents and occupancy levels have so far held up well, with average rent increasing to £12.63 per sq ft (up from £12.45 in March) and the retail occupancy rate holding steady at 97%.

With the shares having delivered capital gains of 12% over the past 52 weeks, NewRiver currently trades at a 13% premium to its net asset value (NAV). To most investors that may seem rather pricey, as the UK property sector as a whole trades at a slight discount, but I can see why the shares may justify a premium.

NewRiver has tempting income and growth appeal, with shares yielding 5.9% and growth underpinned by management’s strong experience and track record.

Opportunistic

But for those investors looking for a less expensive play in the sector, Regional REIT (LSE: RGL) may be the right property stock for you.

It is an opportunistic investor in industrial and office assets located in regional centres outside of London. The company may seem like a somewhat more risky play on the property sector, as it focuses on high-yielding, undervalued properties with under-appreciated recovery prospects.

But with this strategy also comes potentially greater returns — Regional REIT aims to deliver an attractive total return of around 10%-15% annually. So far it is doing well. Since the start of the year, it has secured a number of re-gears, achieving an average uplift of 2.8% on headline rents.

And with its shares trading at a discount of 2% to its NAV and yielding 7.3%, Regional REIT seems to offer a potent mix of a high yield and an enticing valuation.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.