The 8p annual dividend has been maintained for a decade. And at 102.5p, that’s a 7.8% yield, with some interesting growth prospects under the surface.

The key metrics

AEW owns 34 commercial properties. With an average lot size of £6.3m, they’re at the smaller end of the scale. It leases these to 131 tenants across the UK. Around 37% of the portfolio is industrial, 21% high street retail, 14% retail warehouses, and 11% offices.

By these metrics, the firm’s interesting to say the least. And it’s easy to see why the stock has a dividend yield high enough to turn £20,000 into £1,560 a year.

Occupancy’s below the sector average and the average lease has less time to expiry. The company’s average cost of debt is below 3%, but it matures in a year and creates a refinancing risk.

In general, investors like to see long-term earnings visibility and AEW doesn’t really fit that model. But are these risks actually opportunities in disguise?

Growth REITs

In exchange for favourable tax treatment, REITs have to distribute at least 90% of their profits. As a result, they retain almost nothing to finance growth – they collect rent and pass it on to shareholders.

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.

AEW’s answer to the growth problem is recycling. It looks to buy assets below alternative-use value, improve, sell, and redeploy. 

That’s why the firm’s occupancy levels are low – a couple of its major facilities are being refurbished. But that’s where the growth potential comes from. 

AEW has a good track record of improving and recycling. Since going public in 2015, it’s sold 21 assets at an average 41% above what it paid for them.

The risks are real. But they’re there as a result of a carefully-designed strategy for growth, not by accident.

Something different?

Despite a lot of recent interest from private equity, there’s no shortage of steady long-lease REITs in the UK for passive income investors. AEW offers something different. 

Occupancy and earnings can wobble as buildings are emptied, refurbished, and re-let. And short leases demand constant management rather than a hands-off approach.

It’s exactly those features that mean it has growth prospects most REITs simply can’t match. That’s why I think it’s worth a closer look for investors.

REIT investing isn’t for everyone. But a 7.8% dividend yield with a growth engine is a rare find and that’s why it’s on the list of names I keep on my radar in this sector.

What income stock do we like better than Aew Uk REIT 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.

Stephen Wright does not own shares in any of the companies mentioned.

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Bumping up the yield

For income investors, a dividend yield of around 4%–5% is arguably the sweet spot for sustainable income without entering high-risk territory. This can be increased to 5%–7%, but the scope to find a diversified portfolio of companies starts to thin out a little.

Yet when we’re talking about generating a sizeable amount of income, ideally, an investor will be looking to buy stocks with a yield in excess of 7%. This is because it can allow the portfolio to compound at a faster rate, making the existing money work harder, and ultimately reducing the time it takes to reach the income goal.

Of course, buying UK stocks with yields above 7% can mean there are some risky companies that might not be able to sustain the same level of payouts for years to come. But there are still some gems out there with high, sustainable yields.

Talking figures

In terms of numbers, let’s say an investor can spare £1,000 a month. I’ll assume an average yield of 8%. If this were kept up over time, the portfolio would pay out an average of £2,999 monthly just after year 17.

Of course, this might seem a long way away. If the yield was increased to 10%, this time would fall by two years. Or if the yield was kept at 8% but £1,500 was invested each month, it would take just under 14 years.

A good example

In terms of a stock that could be considered, there’s AEW UK REIT (LSE:AEWU). The stock is down 1% in the last year and has a dividend yield of 7.86%.

The real estate investment trust (REIT) owns a portfolio of commercial properties across the UK. Rather than building properties from scratch, the company focuses on buying undervalued assets, improving them as needed, and collecting rental income from tenants. REITS also have tax advantages.

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.

The business model is fairly simple, as the firm makes money by owning property. Tenants pay rent, and after operating costs and interest expenses are covered, much of that income can be distributed to shareholders as dividends.

One reason the dividend looks attractive is that it is supported by recurring rental income. Unlike a traditional company where profits can swing dramatically depending on sales, property owners often have long leases that provide visibility over future cash flows. Evidence of this was seen in the latest quarterly update, where “for the 42nd consecutive quarter” the board approved the 2p dividend per share.

It’s true that one risk is the cost of debt. The REIT has to take on borrowings in order to finance new projects. However, the current fixed rate of interest as of May is 2.96%. This is low relative to the base rate of 3.75%, so it’s managing the risk well for the moment.

Overall, I think it’s a good stock to consider for investors looking at this income strategy.

Should you invest £5,000 in Aew Uk REIT Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Aew Uk REIT Plc made the list?

Jon Smith has no positions in the shares mentioned.

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Sorting the risks from the opportunities isn’t easy. In my view, however, there are at least a couple that are worth looking at in June.

REITs

When it comes to passive income, I’m a big fan of real estate investment trusts (REITs). These are distinctive businesses with some unique features.

REITs were designed to help people access the property market without needing a huge deposit. And from that perspective, they work.

Fundamentally, REITs own and lease properties to tenants. And they return 90% of their taxable income to investors as dividends. 

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.

The downside is that growth can be limited. If you have to distribute all your cash, you can’t use it to buy more properties. 

So why do it? The big advantage is that real estate investment trusts – legally – are exempt from paying tax on the income they generate.

In general, this makes REITs some of the more stable passive income stocks around. And the trade-off for limited growth is higher dividend yields.

Primary Health Properties

I said that REITs are known for stability. But Primary Health Properties (LSE:PHP) arguably takes this to the next level. 

The firm owns and leases GP surgeries and healthcare centres. And around 88% of its rental income comes from government-funded entities.

That means high occupancy rates, strong rent collection metrics and low default risk. All of these are very positive for long-term income investors.

With a 57% loan-to-value ratio, the firm has a lot of debt. And despite long-term leases and reliable tenants, that’s something to keep an eye on.

At 92.45p a share, the stock comes with a 7.79% dividend yield. And its record of increasing this over time is a thing of beauty. 

Source: Fiscal.ai

The growth isn’t spectacular, but it is consistent. That’s why I think income investors should have the stock on their radars.

AEW REIT

In many ways, AEW REIT (LSE:AEWU) is the polar opposite of Primary Health Properties. Instead of stability, it looks for opportunities.

The firm focuses on leases that are close to expiry. This is a high-risk strategy – no REIT wants vacant properties.

That’s a danger when contracts start to run down. But AEW aims to limit this danger by focusing on areas with limited supply.

This means tenants have limited alternatives. And by targeting properties where it can add value, re-leasing becomes a chance to increase rents.

With this type of strategy, managing debt levels is extremely important. But this is something the firm does very well.

Source: Fiscal.ai

A 7.55% dividend yield means AEW shares are worth considering. And the stock could add an interesting dimension to a passive income portfolio.

Passive income

Different investors – rightly – have different ambitions. My own focus is on looking for companies that can reinvest and compound their earnings.

This is a real challenge for REITs that have to distribute their income as dividends. For passive income, however, they can be a great choice.

REITs have a lot in common, but they aren’t all the same. But with Primary Health Properties and AEW, there might be something worth considering for everyone.

Stephen Wright does not own shares in any of the companies mentioned.

The post 7.5% yields! Here are 2 very different dividend stocks to consider buying in June appeared first on The Twelfth Magpie.

Today there are more than 50 investment trusts in the UK alone with dividend yields above 5%. Three in particular have caught my eye as worthy of further research: Chelverton UK Dividend Trust (LSE:SDV), AEW REIT (LSE:AEWU) and Invesco Bond Income Plus (LSE:BIPS).

If City forecasts are correct, a £9,000 investment spread equally across them will generate £675 in dividends this year alone. If done so within a Stocks and Shares ISA, every penny of this would come tax-free.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Forget the FTSE?

The Chelverton UK Dividend Trust focuses on “a high and growing income through investments in mid to small-cap companies exclusively outside the largest 100 UK stocks.”

It’s a higher-risk strategy than one focused that’s focused on FTSE 100 shares. Both share prices and dividends can be less stable during economic downturns. But it also means investors can enjoy much greater yields than a Footsie tracker fund — for 2026, Chelverton’s yield is an enormous 7.9%.

The trust’s portfolio is also well diversified to limit the chances of such volatility. In total, Chelverton holds shares in 68 different dividend payers as varied as insurers and energy producers, to banks, tobacco makers and consumer goods manufacturers. Dividends here have been cut just once since 2010.

Designed for dividends

As the name implies, AEW REIT is a real estate investment trust (or REIT). As such, it’s designed to deliver a steady flow of passive income to investors.

Under sector rules, at least 90% of their annual rental profits must be paid in dividends. This leaves a huge 7.7% dividend yield at this particular REIT for 2026. So what’s the risk?

Firstly, the value of AEW’s shares can drop when rising interest rates hit earnings. This can also have an impact on dividends as greater borrowing costs dent rental profits. Yet investing in any dividend stock comes with risk, and I believe this company is more secure than most others.

Its portfolio is well diversified across 34 companies, spreading the risk of rent defaults. And it has a strong balance sheet to support dividends, with a low loan-to-value (LTV) around 25%.

A 7.1% opportunity?

Invesco Bond Income Plus is different in that it invests in “high-yielding fixed-interest securities.” This can provide added security for passive income chasers as, while companies aren’t required to pay dividends, they must pay interest on any bonds they issue. Trusts like this then distribute it to their investors through regular coupon payments.

Yet of course this doesn’t make them risk-free. Businesses can default on their bond obligations, especially during periods of economic stress or high interest rates. And this trust is especially exposed, with roughly 70% of it invested in below-investment-grade bonds.

The upside is it means Invesco Bond gets a larger return on its investments. And so the dividend yield is a huge 7.1%. I think it’s a great investment trust to consider as part of a diversified portfolio.

Should you invest £5,000 in Aew Uk REIT Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Aew Uk REIT Plc made the list?

Royston Wild does not hold any positions in the companies mentioned.

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Reviewing the details

I’m talking about AEW UK (LSE:AEWU). The share price is up a modest 3% over the past year. The company buys and manages smaller commercial properties across the UK. I’m talking about offices and retail units, with the management team often targeting assets priced below £15m that larger institutional investors might ignore.

In a way, the trust is focused on value investing, but in the property space. As a result, income comes not just from rental flows, but also from capital appreciation over time from buying mispriced or underperforming buildings.

The lack of serious share price growth in the last year does speak to the fact that the UK commercial property sector has been under pressure from higher interest rates and economic uncertainty.

That’s weighed on valuations and sentiment, even for AEW, which I would describe as a well-run trust. Yet I believe this makes the stock undervalued. For example, the share price trades at a 5.3% discount to the net asset value (NAV). In theory, there shouldn’t be a discount, but the difference indicates to me some lingering negative sentiment weighing on the stock.

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.

Dependable income

Despite the challenges, AEW has shown resilience. It’s maintained a remarkably consistent dividend track record, with 41 consecutive quarterly payments! This clearly signals underlying cash flow strength. On top of that, the company continues to actively manage its portfolio to target higher-yielding opportunities.

In my view, a major benefit was highlighted in the latest quarterly results. It mentioned that the “company continues to benefit from a low fixed cost of debt of 2.959% until July 2027”. This helps ensure financing costs in the coming year won’t catch the business off guard.

The above means that the dividend per share seems very sustainable to me. If an investor put £2k in the stock, the quarterly dividends could start to accumulate. If the dividends were reinvested back in the stock, things could compound faster. After a decade, without having to put another penny of capital in, it could pay out £340.55.

Of course, there are risks associated with dividends. There’s no guarantee they’ll continue into the future. If the trust runs into problems, it could result in the income being reduced. However, given the trust’s current outlook and financial situation, I think it’s a stock worth considering.

The post £2,000 in this REIT could pay £340 in annual passive income appeared first on The Twelfth Magpie.

These are firms that lease properties to tenants and distribute the cash to shareholders. And the returns can be very attractive due to tax advantages they have.

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.

Earning income

Some REITs come with very high dividend yields. But while this can be a warning sign, a few are worth a closer look.

A 7.5% annual return is better than a savings account. And investing at that rate can bring big results over time. In Year One, a £10,000 investment earns £750. But reinvesting the dividends at the same rate means more income next year. 

At the same rate, the return in Year Two reaches £806. And by Year 10, it reaches £1,437 – more than twice the Year One return. After 30 years, this process returns £6,108 in dividends. That’s income that investors don’t have to do any work for. 

The big question is how to find 7.5% opportunities. Fortunately, the UK is an unusually good place to look. 

Primary Health Properties

Primary Health Properties (LSE:PHP) owns GP surgeries and health centres, and it’s a long-term passive income machine.

Its average lease has almost 10 years to run and the bulk of its income comes from the NHS. That’s about as reliable as it gets.

That reliability however, comes at a cost. It means chances to increase rents don’t come around often and negotiating can be tough. There’s also a risk that a change in government policy could affect demand. That’s impossible to rule out. 

The firm has however, recently acquired its biggest competitor. That should strengthen its negotiating position. 

Dividends are never guaranteed, but in terms of a reliable 7.5% yield, Primary Health Properties has to be worth considering.

AEW REIT

AEW REIT (LSE:AEWU) is the opposite of Primary Health Properties. But there’s more than one way to be a great investment.

The firm’s portfolio is a mix of different property types. These include leisure centres, gyms, and car parks.

The average lease is also much shorter, with less than six years to expiry. That obviously creates a risk of vacancies. With risk however, comes opportunity. AEW looks to use expiring leases as a chance to negotiate higher rents.

As a result, the firm focuses on properties with certain feafures. This can be low competition or scope for improvement.

Finding a 7.5% dividend yield with real growth potential is rare. So AEW has to be worth a closer look at today’s prices.

UK REITs

Stable businesses and high yields are an attractive combination. And UK REITs have been attracting attention recently. There are however, still some opportunities that I think are worth considering. These include Primary Health Properties and AEW.

A portfolio of stocks like these could be a valuable asset. And reinvesting dividends could generate real passive income.

The post How to invest £10,000 to aim for a £6,108 annual passive income appeared first on The Twelfth Magpie.

That means investors only have one week left to get cash into their accounts. But while they don’t have to invest that straight away, there are plenty of interesting opportunities worth considering right now.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Buy the dip?

One potential idea is InterContinental Hotels Group (LSE:IHG). Shares in the FTSE 100 hotel chain are down 6% in the last month. 

The main reason is the conflict in Iran, which is disruptive to travel and tourism. And the risk is that it continues longer than expected.

A 6% decline isn’t exactly a crash, but this is an unusually high-quality business. Its low capital requirements make it very attractive.

This comes from not owning the hotels in its system outright. Operating costs get left to local owners who pay to be part of the firm’s network.

It also has an attractive growth pipeline representing 33% of its existing network. And the cost of that expansion should be minimal.

The stock isn’t exactly in deep value territory. But a quality business that’s facing temporary challenges might be worth checking out.

Keeping it simple

A stock that has gone down a lot is Diageo (LSE:DGE). A 54% decline means it’s at a price that would have been unimaginable five years ago.

Since 2021, though, revenue growth has stalled and margins have contracted. That’s due to a number of issues, some of which are still ongoing.

One of these is changes in consumer preferences. And despite having a strategy, Diageo has been slow to react to these.

That, however, is changing. Under Sir Dave Lewis, the firm is looking to use its scale to be more competitive on price. 

It isn’t guaranteed to work, especially with consumer budgets under pressure. But it’s clear that doing the same thing is also risky.

The firm also has plans to improve its balance sheet and simplify its operations significantly. At today’s prices, I think it’s worth a look.

Something a bit different

It’s not uncommon to find real estate investment trusts (REITs) with high dividend yields. But AEW UK REIT (LSE:AEW) is a bit different.

REITs usually focus on securing long leases on properties with high demand to secure reliable income. AEW, however, does the opposite.

Long-term contracts offer stability, but often at the cost of growth. And high demand often leads to more competition from rivals.

Instead, AEW focuses on properties where supply is scarce, limiting choices for tenants. And shorter leases create opportunities to increase rents.

The downside is that if a tenant goes bust, it’s harder to find another one. That’s a risk, but the compensation for it is a 7.7% dividend yield.

It’s an unusual approach, but the firm has an excellent record. So I think it’s one for dividend investors to think about before April 3.

Stocks and Shares ISAs

Investing in a Stocks and Shares ISA can make a huge difference to long-term returns. But the deadline for adding cash to an account this year is April 3.

If the £20,000 contribution limit isn’t added to an ISA, it can’t be carried over. So this might be the most important time of the year to think about your investing strategy.

The post Looking for last-minute ISA ideas? Check out these UK stocks before April 3 appeared first on The Twelfth Magpie.

Making plans

The first step is to determine what a realistic annual rate of return could be. There’s no point forecasting something for the next decade that’s unrealistic, only to get disappointed further down the line.

For example, even though there are stocks with dividend yields above 10%, I think it’s a bit ambitious to target this for the portfolio each year. At the other end of the spectrum, I think it’s easily possible to beat the FTSE 100 average yield of 2.84%.

By active selection, I believe a dividend portfolio could target a yield of 6%-8%. This would maximise potential reward while avoiding very-high-risk stocks.

From there, we can do some reverse engineering. With an average yield of 7%, earning £1k a month in 2036 would mean the portfolio at that point would need to be £171.4k. In theory, someone could invest that lump sum now. Yet it’s unlikely that many have this much money ready to go. An alternative option would be to invest just under £1,000 a month. If dividends are compounded over the next decade, this could reach the £171.4k needed.

Of course, trying to predict anything a decade down the line is tough. The world can change rapidly, negatively impacting companies and future dividend flows. However, it provides a guide to the ballpark figures and yields needed to make the goal a reality.

Property in focus

One stock that could be considered for this goal is AEW UK (LSE:AEWU). The real-estate investment trust (REIT) share price is up 11% in the past year, and it boasts a 7.25% dividend yield.

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.

The managers focus on a diversified portfolio of small- and mid-sized UK commercial properties, mostly outside London. Unlike some other REITs, it actively looks to buy mispriced properties, which it then improves and leases out. Not only does this act to increase rental income, but it can also help secure capital appreciation in the future by hopefully selling at a higher price.

This gives it a good angle not only for income via dividends but also for share price gains. That’s because the net asset value of the portfolio increases over time.

From a sustainability perspective, the average lease term is over five years, and the loan-to-value on the properties is around 25%. This provides long-term revenue security and low risk from interest rate changes. However, one risk is that the commercial property market is cyclical. If the UK economy underperforms in the coming couple of years, it could pass through to weaker tenant demand for AEW.

Even with this, I think it’s a good stock for income investors to consider.

The post How much do you need in income shares to generate £1k a month in 2036 appeared first on The Twelfth Magpie.

Take AEW REIT (LSE:AEWU) and Admiral Group (LSE:ADM). As well as having yields of 7% or above, these passive income heroes have other qualities that make them great value picks to consider

Want to know why they could turbocharge passive income? Read on.

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.

Top trust

Real estate investment trusts (REITs) are designed to provide a larger and more reliable income stream than most other dividend shares. At least 90% of their rental earnings must be paid out each year, in exchange for juicy tax breaks.

Companies like AEW REIT enjoy a steady stream of rental income they can use to fund shareholder payouts. In this case, dividends are paid four times a year. The question is, can the business continue doing so given tough conditions in the broader economy?

After all, the trust is exposed to highly cyclical sectors like industrials and retail. On balance, though, I’m confident in its future dividend prospects. It has 132 tenants on its books, which guards group profits from widescale rent collection and/or occupancy issues.

What’s more, the weighted average unexpired lease term (or WAULT) until expiry sits at 5.6 years. This provides solid near-term earnings (and by extension dividend) visibility.

But what makes AEW REIT such an attractive value stock today? It doesn’t only provide plenty of bang for one’s buck with its 7.5% forward dividend yield. It trades at a handy 5% discount to its net asset value (NAV) per share.

FTSE 100 dividend star

At 7%, the dividend yield on Admiral’s shares is the third-highest on the FTSE 100. Can it meet City analysts’ lofty income expectations? I think so.

Unlike many high-yielding financial services shares, Admiral operates in the stable general insurance market. Consumer spending here remains largely unchanged across the economic cycle, providing dependable premium income it can distribute through dividends.

This company’s ace in the hole, however, is its dominant position in the motor insurance market. In the UK, it insures more cars than any other and has a 14% market share. It also has positions in overseas markets. This is important, as motor coverage is a legal requirement, providing earnings with additional protection.

Admiral’s cash-rich balance sheet also provides future dividends with support. According to latest financials, its Solvency II capital ratio was 194%, well above regulatory requirements.

There’s no such thing as a risk-free dividend share. In this case, dividends could fall short of forecasts if costs spike again, putting margins under strain. Admiral also has significant competitive pressures to navigate to keep growing earnings and payouts.

But on balance, I think it’s a solid dividend stock to consider today. It also trades cheaply right now. Its forward price-to-earnings (P/E) ratio of 12.3 times is way below the 10-year average of 17-18.

The post 2 dirt-cheap dividend stocks to consider in March with 7% yields! appeared first on The Twelfth Magpie.

That’s why to try and sort the value traps from the genuine bargains, it’s important to take a closer look before investing in any high-yielding stocks.

With this in mind, I’ve been studying AEW UK REIT (LSE:AEWU). Based on amounts paid over the past 12 months, the real estate investment trust (REIT) is currently (30 January) offering an amazing yield of 7.5%. And in my opinion, I think it’s an excellent passive income opportunity to consider.

Here’s why.

A different business model

Like all REITs, to preserve certain tax advantages, AEW must return at least 90% of its relevant profit to shareholders each year by way of a dividend. And since early 2016, it’s been remarkably consistent with a payout of 2p each quarter.

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.

The trust has an unusual approach in that it buys commercial property leases it says are mis-priced and soon to expire. At 30 September 2025, its average weighted unexpired lease term before break clauses kick in was just 3.95 years. Buying short leases gives it an opportunity to negotiate rent increases relatively quickly after purchase.

And this approach appears to be working. Since early 2021, it’s outperformed the MSCI/AREF UK PFI Balanced Funds Quarterly Index, its chosen benchmark, by nearly 7%.

Unusually for the sector, the trust focuses on smaller commercial premises (typically less than £15m). And it has a good mix of industrial, retail, and office properties in its portfolio.

Some challenges

But there are a couple of things that could impact its future dividend. One issue that needs to be taken into account is the trust’s debt facility, which is due to be renewed in May 2027. Given its relatively low loan to gross asset value – it was 25.2% at 30 September — extending this shouldn’t be too much of a problem.

But at the moment, it’s paying fixed interest of 2.959% per annum. Given the higher interest rate environment in which we find ourselves, I suspect it will have to pay more post-renewal. For the year ended 31 March 2025, finance costs accounted for 10.5% of net rental income, so there appears to be plenty of headroom here.

Also, the trust’s focus on smaller properties means its tenants are mainly small- and medium-sized enterprises. These might not be as financially robust as the clients of other REITs who have blue-chip companies occupying their premises. The risk of bad debts is therefore higher.

My view

Despite these concerns, latest figures show that the trust enjoys a 93.68% occupancy level. In addition, its rental yield’s in excess of 8%. It also has a good track record in selling leases significantly above what it paid for them.

On balance, although dividends can never be guaranteed, I think AEW’s looks reasonably secure for now. And with a yield of 7.5%, passive income investors are likely to believe there’s an opportunity to consider here. And in my opinion, they’d be right.

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