Required to distribute at least 90% of their taxable income for each accounting period to investors, where the income is treated as property rental income rather than dividends.

– London Stock Exchange

This is the price REITs pay for the tax breaks they receive. And it makes them no-brainers for regular juicy dividends, right? Well not exactly…

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.

Dividend heroes

Like any share, these companies’ profits can come under pressure from a variety of company- or industry-specific problems, or stress in the broader economy. REITs have less discretion over what to do with their rental profits each year. Yet this doesn’t guarantee either a large or growing dividend every year.

However, some property investment trusts are more resilient than others. Take the following three: Supermarket Income REIT, Primary Health Properties, and Unite Group (LSE:UTG).

Not only do they have long records of dividend growth. Their forward dividend yields also more than double the FTSE 100 average of 3%:

Reliable passive income

Primary Health Properties has raised dividends every year since the mid-1990s. And though Supermarket Income’s record doesn’t look half as impressive, it was only founded in 2017. Since paying its first dividend, dividends have risen every year since it listed on the London stock market.

This durability reflects in large part these REITs’ ultra-defensive operations. Supermarket Income rents out properties to major food retailers, whose revenues remain stable from year to year. Primary Health’s operations are even more resilient — it owns and operates healthcare properties like GP surgeries, dentists, and pharmacies, from which roughly 90% of rents are guaranteed by government bodies.

Rental earnings can be impacted by rising interest rates and changes in property valuations. But on balance, both these top dividend stocks deserve serious consideration.

An unloved REIT to buy?

But what about Unite Group? I also think it merits serious attention following recent share price weakness. It’s shed a whopping 40% of its value over the last 12 months.

Today it trades on a forward price-to-earnings (P/E) ratio of 8.6 times. Combined with that 7%+ dividend yield, it offers the kind of all-round value I love.

Unite’s shares have tanked as the cost-of-living crisis has damaged demand for student accommodation. As inflationary pressures rise, this could remain a problem. But looking long term, the outlook for this property sector remains robust, driven by rising numbers of international students.

In the meantime, I believe investors can expect a steady flow of rising dividends. Shareholder payouts have risen every year since 2011, stripping out 2019 when the pandemic hit dividends.

I’m confident each of these three top REITs will continue paying large and growing dividends. If they deliver the dividends City analysts are tipping, investors will enjoy a £750 passive income this year alone, based on a £10,000 ISA investment.

Should you invest £5,000 in Unite Group 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 Unite Group Plc made the list?

Royston Wild owns shares in Sage.

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The FTSE 100‘s still packed with market-leading businesses that have strong balance sheets and diversified revenue streams. These are critical qualities for any quality dividend-paying share. But rapid share price gains mean the dividend yields on many of these top shares have crumbled.

Today, the number of FTSE 250 stocks offering forward dividend yields above 7% is 41. That’s more than five times the number currently listed on the FTSE 100. Not all of these are rock-solid buys for passive income, either in the near term or beyond. But a large number are, sharing the same enviable qualities as many high-yielding Footsie shares.

So which ones are worth serious consideration?

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.

7%+ dividend yields!

Unite Group (LSE:UTG) and Supermarket Income REIT (LSE:SUPR) are two top shares I don’t yet own but have caught my eye. At current share prices, their forward dividend yields sit at 7.7% and 7.8% respectively.

The result? A £20,000 lump sum invested across them today could generate total dividends of £1,550 over the next 12 months.

Unite’s the largest provider of student accommodation in the UK. Its portfolio comprises 142 different properties across 22 cities, providing a steady stream of income it can pay out in dividends. Its share price has collapsed 12% in 2026, as tough economic conditions have seen cash-strapped students prioritise living at home over staying in digs.

The good news? As well as driving the yield close to 8%, Unite shares trade on a forward price-to-earnings (P/E) ratio of 7.5 times. This represents an attractive dip-buying opportunity to think about.

The student accommodation market is under pressure right now, but the long-term outlook remains robust. And Unite has a strong balance sheet to maintain strong dividends in the meantime. This should be helped by the firm’s plans to divest £300m-£400m worth of low-quality assets each year.

Another REIT opportunity?

Like Unite, Supermarket Income REIT is a real estate investment trust. This can carry an additional advantage for passive income seekers as, under sector rules, at least 90% of yearly rental earnings need to be distributed through dividends.

This FTSE 250 share isn’t suffering the same demand issues as Unite. As its name suggests, it rents out properties to leading supermarkets where vacancy and rent collection remains stable over time. It lets out roughly 130 stores in total to the likes of Tesco, Sainsbury’s and Waitrose. And its operations span the UK and France, providing added diversification that helps spread risk.

The downside is that rising interest rates could put rental profits under pressure. But while this could impact Supermarket Income’s share price, I’m not expecting this to impact dividends in the near term. With a price-to-book (P/B) ratio of 0.9, I believe it’s a cheap dividend share to consider.

Should you invest £5,000 in Supermarket Income 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 Supermarket Income REIT Plc made the list?

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

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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.

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.

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

The post How can these top passive income stocks be trading at bargain prices? appeared first on The Twelfth Magpie.

UNITE Group (LSE:UTG) is the UK’s largest provider of purpose-built student accommodation. And since April 2025, its shares have tumbled a stomach-churning 46.5%, dragging the stock back to levels not seen since late 2014.

The result is a payout of around 8.1% a year. But is this secretly a rare buying opportunity, or is it a warning trying to tell investors something important?

Digging deeper into UNITE’s ops

UNITE Group’s the UK’s dominant provider of purpose-built student accommodation (PBSA) and owns over 70,000 beds across university cities nationwide.

Unlike typical landlords, UNITE forms long-term partnerships directly with universities, securing reliable demand from some of the most academically prestigious institutions in the country.

Since the business is structured as a real estate investment trust (REIT), almost all of this rental income is returned to shareholders through chunky dividends. And this highly cash-generative business is precisely what makes the high yield even more compelling.

But if that’s the case, how come the shares are now at their lowest level in over a decade?

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 have the shares fallen so hard?

Quite a few forces have collided to create this sell-off. First, the UK government’s tightening of international student visa policy has meaningfully softened demand from overseas students. That’s important to highlight since these students have historically been some of the biggest premium-paying tenants and are a key driver of both occupancy and rental rates.

The second factor is UNITE’s recent acquisition of Empiric Student Property, which has suffered quite a bit of unexpected turbulence.

Integration difficulties have led to lower occupancy and shorter tenancies. To make matters worse, management’s warned of an expected 10% increase in operating costs . This is driven by Minimum Wage increases and higher Employers’ National Insurance contributions that impact UNITE’s large on-site workforces.

The result? Management slashed its 2026 adjusted EPS guidance range to between 41.5p and 43p. By comparison, earnings in 2025 landed at 47.5p, signalling a potential 12.6% incoming drop.

Is there a buying opportunity here?

There’s no denying that UNITE’s seemingly in a tricky spot of rising expenses and wobbly demand, not all of which was self-inflicted. However, despite the gloom, there’s still a potential opportunity here.

UNITE’s net tangible asset value stands at 955p per share, against a current share price of around 465p. In other words, the company’s trading at an enormous 51% discount compared to its underlying property portfolio.

Management’s seeking to sell £300m-£400m worth of underperforming properties in 2026. But the discount remains substantial even after factoring in these future asset sales.

At the same time, reservation rates for the 2026/27 academic year have reached 74%. This is in line with internal expectations, suggesting that the business may have started to stabilise.

There’s no denying that UNITE still has a long list of challenges and uncertainties to overcome. But for patient investors prepared to hold through the turbulence, there’s an 8.1% dividend yield on offer with a near 50% margin of safety right now. And that’s why I’m planning to take a much closer look.

The post After tanking 46.5%, this FTSE 250 stock offers me an 8.1% dividend yield appeared first on The Twelfth Magpie.

Want to know what makes them excellent turnaround shares to consider? Read on…

Growing market

Unite Group is the UK’s largest provider of student accommodation, operating 142 properties across 22 university towns. It’s slumped 44% in value over the last year during a tough period for the company.

Student numbers are still rising, but rental growth and reservations have cooled, reflecting pupils’ currently fragile finances. In February, the company cut its full-year guidance and warned that rents would grow at the “lower end” of a 2%-3% range. To add to its problems, the soaring oil price is raising inflationary pressures and interest rate risks. Borrowing costs can balloon for property stocks when rates increase.

Yet the long-term outlook for its market remains robust as ever. Britain’s centuries-old position as an academic hub isn’t going to change any time soon. I expect revenues and earnings to pick up sharply when economic conditions improve.

This makes Unite shares an attractive recovery share in my book. And right now it offers terrific value, with a forward price-to-earnings (P/E) ratio of 9.3 times. But that’s not all — the dividend yield for 2026 is a pumped-up 8.4%.

One final thing: as a real estate investment trust (REIT), Unite must pay at least 90% of annual rental profits out in dividends. And dividend cover is robust at 1.2, making it a great share for dividend investors to consider.

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.

Another bargain stock to buy?

Sage’s share price has been hit by a double-whammy in recent months. It means the software share’s down 33% on a 12-month basis.

Firstly, it’s dropped on fears that widescale artificial intelligence (AI) adoption will hit client demand. Broader economic worries have also hit the broader IT sector, worsened by the escalating Middle East conflict.

It’s no surprise that fears of a cyclical downturn have hammered Sage’s shares. But have AI-related concerns been overblown? I think so. Over the longer term, I’m confident the FTSE 100 share will rebound strongly as sales increase.

I’m confident for a few reasons. Accounting, payroll and HR are critical processes in any business, and I’m not certain millions of them will be willing to entrust this to AI. Particularly when you consider what a low proportion of a company’s total costs Sage’s software account for.

Furthermore, Sage is actually integrating AI into its products to turn this danger into an opportunity. And it seems to be paying off, driving double-digit revenue growth.

There’s clear risk here, but I think this is more than baked into Sage’s share price today. The forward P/E is 16.5 times, miles below the 10-year average of 31-32.

The post Down 45% and 33%! Consider these 2 cheap stocks to buy in April appeared first on The Twelfth Magpie.

A short-term hit

The dividend yield calculation factors in the dividend per share and the share price. Therefore, if the dividend hasn’t changed in recent weeks but the share price has fallen, it pushes up the overall yield.

One company this has happened to is Unite Group (LSE:UTG). The share price is down 19% in the past month and 42% over the last year. It’s the largest owner, developer, and manager of purpose-built student accommodation in the UK. As a result, the general selling pressure — partly related to worries over the Middle East — is misplaced for Unite, as it doesn’t have any exposure.

However, the stock has also been hit by a weaker 2026 earnings outlook released in February. The real-estate investment trust (REIT) outlined softer demand for student housing in some markets, suggesting profits could fall this year. Obviously, this isn’t great and remains a key risk going forward.

This has pushed the dividend yield up from 6.5% at the end of last month to 7.99% now. That’s a 23% increase. More than that, I think the dividend is sustainable. As a REIT, it needs to pay out income in order to keep certain favourable tax treatments. Further, the dividend cover ratio is 1.2. This means that earnings comfortably cover the level of dividends being paid. Finally, let’s not forget that student housing tends to be less cyclical than other property sectors because demand comes from universities. So, with a long-term investment lens, I think this could be a good income stock to consider.

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.

Dividend pressure

Not all increases in yield mean that the stock is a great dividend purchase. For example, take Marshalls (LSE:MSLH). The dividend yield has popped from 4.3% last month to 5.34% currently.

The share price fall of 20% in the past month compounds the 41% drop in the past year. It has struggled due to a slowdown in the construction and housing markets. Interest rates in the UK haven’t fallen as quickly as many had expected over the past year. Further, concerns about higher inflation due to the spike in oil prices means investors have repriced their thinking for any cuts in interest rates this year. In fact, I’ve heard talk of raising interest rates to combat inflation! This would hurt Marshall’s future as it could cause mortgage rates to increase, putting off new buyers.

As for the dividend, the company already cut its interim dividend by about 15% last summer. With profits declining, I doubt it will increase any time soon. Therefore, the high dividend yield needs to be treated with caution.

I could be wrong. The company is pushing hard for cost savings, which could act to ease financial pressure. If the Middle East conflict ends quickly, we could see consumers more confident about making large purchases, such as property. However, it’s not an income stock I’d consider right now.

The post The dividend yield of these 2 income stocks just jumped almost 25% appeared first on The Twelfth Magpie.

Sabre Insurance Group (LSE: SBRE) certainly fits my value criteria, with a forward price-to-earnings (P/E) ratio of only 8.6. That gives it a lot of room for growth if markets recover. But it also boasts a very attractive 9.3% dividend yield. 

Usually, when I see that combination, I expect to find a share price that’s been in decline for years. But not here — Sabre is actually up about 30% over the past two years.

So, is it an untapped income opportunity with strong prospects, or a value trap?

Let’s take a look.

A tough industry

Despite a rise in profitability and improving margins, Sabre’s share price has suffered a moderate decline in the past few months. This could be attributed to falling gross premiums and a weakening UK motor insurance market.

Management has prioritised margin over volume to protect against “external macro shocks,” but this has come at the cost of headline revenue and future growth rates.

Now, analysts forecast stable (but not growing) profits for 2025, which could limit capital appreciation in the short term. But for income investors, that wouldn’t be a huge issue — so long as the dividends remain steady.

That’s where things start to look questionable. With very little cash flow, even a mild profit hit could risk a dividend cut.

Where things could go wrong

There are some notable risks to account for, including ongoing claims inflation and premium declines if the UK car insurance market remains soft. Also, it relies on its disciplined pricing strategy to draw business, which could limit growth.

Additionally, Sabre underperformed both the wider market and its insurance peers over the past year, reflecting investor caution. If sector conditions worsen or claims inflation spikes, Sabre may be forced to reduce dividends or see further share price declines.

I’d say the risks may outweigh the potential returns in this case. Fortunately, there are many other options.

A safer pick?

For risk-averse investors, a more stable income stock to consider is the student accommodation developer Unite Group (LSE: UTG). It’s not quite as impressive with only a 6.3% yield, but it looks more sustainable. It may not be ‘the best’ stock out there (that’s very subjective, after all). But it could be worth further research.

As a real estate investment trust (REIT), it’s required to return 90% of profits to shareholders as dividends. That adds a level of reliability for those seeking passive income.

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 caveat is that REITs tend to underperform in weak markets. Subsequently, Unite shares have lost a third of their value this year as the UK property market struggled. So long as that continues, returns may be limited.

Final thoughts

Unite’s current price looks significantly undervalued, with a P/E ratio of only 7.8. With the UK housing market already hinting at a recovery, 2026 could be a good year for Unite Group.

But November is always a difficult time to pick stocks, and the upcoming Autumn budget adds extra uncertainty. While I think it’s a promising REIT to consider, I’d wait until the month’s end before making any big decisions.

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A top REIT

Real estate investment trusts (REITs) can be great shares to target long-term passive income. Sector rules state at least 90% of annual rental earnings must be paid out in dividends. This can make the cash rewards they deliver less volatile than those from other dividend shares.

Unite (LSE:UTG) is one trust I feel demands close attention. It operates in the highly defensive student accommodation market, which gives profits protection from changing economic conditions. Following its acquisition of sector rival Empiric Student Property, it will be the UK’s largest operator with 75,000 beds, chiefly centred on the country’s strongest universities.

Unite has proven one of the UK’s most reliable dividend growth stocks, with payouts rising almost every year since 2011. The only exception came in 2019 when Covid-19 uncertainty forced a reduction.

For this year, the REIT’s dividend yield is a large 6.2%, which is almost double the FTSE 100 average of 3.2%. This figure has been boosted by a sharp fall in Unite’s shares on Wednesday (8 October) — then, the company said sales to date had delivered rental growth of 4%, down from 8.2% in the same 2024 period.

I think this represents an attractive dip-buying opportunity to consider.

Competition is tough, and Unite’s problems are being compounded by extra stress on students’ budgets right now. But the long-term sector outlook remains robust, and the company’s increased scale gives it a significant advantage. I expect dividends to continue rising over the next decade and beyond.

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.

Going green

Foresight Solar Fund (LSE:FSFL) is another top dividend stock worth serious attention after recent price weakness.

It’s fallen in value as optimism over sustained interest rate cuts over the next year have declined. As with Unite, asset values come under pressure when rates are higher, and cost of borrowing pressures increase.

While this issue can be significant, the impact it’s had on Foresight’s dividend yield merits serious consideration. Its forward yield is now an enormous 10.7%.

Like any renewable energy stock, the company has significant long-term investment potential as the move from fossil fuels continues apace.

Foresight has ambitious plans to capitalise on the green transition — the business has 1 GW of capacity across its assets, and plans to treble its development pipeline to 3 GW from current levels, with growth focused on the UK and Europe where clean energy policy is especially favourable.

Investing in energy producers has another significant advantage for investors. Electricity demand is largely unchanged across the economic cycle, giving companies the financial strength and the confidence to steadily raise dividends.

In the case of Foresight, annual dividends have risen each year since it listed on the London stock market in 2013. It’s a theme I expect to continue long into the future.

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Blips can happen, as we saw during the Covid-19 crisis when even reliable dividend shares cut or suspended payouts. But largely speaking, the UK’s blue-chip share index remains a great place to target a decent second income, supported by:

• Dozens of market-leading companies that enjoy strong barriers to entry.
• Companies in mature industries that return more earnings through dividends.
• The presence of many defensive (ie non-cyclical) shares.
• Businesses with strong cash flows and manageable debt levels.

Lift-off

Considering defence shares like BAE Systems (LSE:BA.) can be great ways to target a growing second income. Their operations aren’t substantially influenced by broader economic conditions, giving them the strength and confidence to raise dividends whatever the weather.

This Footsie operator continued increasing cash rewards during the pandemic, underlining this resilience. Defending one’s borders from external threats is any country’s top priority, meaning BAE Systems products enjoy persistently strong demand. In fact, the outlook here is stronger than it’s been for decades as key European clients rapidly re-arm.

Of course tech failures could be highly damaging for future earnings, impacting profits and the company’s reputation. However, the blue-chip’s strong track record helps soothe any fears I have on this front.

Today the forward dividend yield on BAE Systems shares is 2%.

High yielder

Phoenix Group (LSE:PHNX) has a long record of offering above-average dividend yields, as the chart below shows. They’ve grown for around a decade on the spin, and City analysts expect this to continue over the medium term.

As a consequence, the dividend yield on Phoenix shares for 2025 remains enormous, at 8%.

Put simply, the financial services giant is an impressive cash generator. Its share price may disappoint when economic conditions worsen and demand for its financial services might decline. But a strong balance sheet means this doesn’t come to the detriment of its generous dividend policy.

Its Shareholder Capital Coverage Ratio was 172% as of December. I’m expecting the firm’s half-year trading update (on 8 September) to reaffirm its robust financial foundations.

Top trust

Unite Group (LSE:UTG) is set up to provide a large and reliable passive income to its shareholders. As a real estate investment trust (REIT), it must distribute a minimum of 90% of rental profits in the form of dividends. This is in exchange for juicy 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.

Such a stipulation doesn’t on its own mean REITs are no-brainer dividend buys. However, Unite’s focus on the highly stable student accommodation market makes it far more resilient than other property trusts (like warehouse operators or owners of shopping centres).

There are risks here, such as interest rate pressures that can depress asset values. Yet I think the opportunities here outweigh the dangers, supported by growing numbers of overseas students and an enduring property shortage.

The forward dividend yield here is 5.3%. Like BAE Systems and Phoenix, I think the trust is worth serious consideration.

The post 3 FTSE 100 dividend shares to consider for a passive income in September appeared first on The Twelfth Magpie.

That may sound grim, but for income hunters like me, a share price tumble can spell opportunity. At today’s valuation, Unite trades on a price-to-earnings (P/E) ratio of just 10.4 and a price-to-book (P/B) ratio of 0.73. In other words, it looks cheap compared to its assets and earnings power.

The question is: does this Footsie landlord deserve a place in an income portfolio, or is the low price a warning sign?

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.

What does Unite Group do?

Unite Group specialises in student accommodation. Across the UK, the company manages tens of thousands of rooms for university students, making it one of the biggest players in a niche but resilient sector. Even during downturns, demand for university places has remained high – a factor that often supports rental income.

That said, Unite is not immune to the wider UK property malaise. Housebuilders like Taylor Wimpey and Barratt Redrow have also struggled this year, and the weakness across the real estate market has dragged down sentiment for Unite’s stock too.

A closer look at the numbers

Despite the gloomy share price, the business itself is ticking along nicely. Revenue is up 12.7% year on year, while earnings have grown 13.3%. Free cash flow is strong, with a margin of 38.8%, and the balance sheet looks reassuringly sturdy – assets outweigh liabilities four-fold, with a low debt-to-equity ratio of 0.28.

For income investors, the dividend story looks attractive. Unite currently offers a 5% yield, with a payout ratio of just under 49%. Better still, dividends have grown almost every year since 2012, averaging a 10% rise annually, aside from a temporary Covid interruption. Of course, that Covid break reminds us that dividends are never guaranteed.

What’s new?

Just two weeks ago, Unite announced a £723m takeover of Empiric Student Property, a rival student landlord. This deal is part of a wider consolidation wave across the real estate sector following years of subdued activity. If it pays off, Unite will significantly boost its market share. If it doesn’t, however, it risks the deal weighing on returns for years to come.

The market reaction so far has been cautious, but analysts remain upbeat. Citi slapped a Buy rating on the stock in mid-August with a target of 1,205p. The average 12-month price target from analysts is 973p, suggesting a potential 34.5% increase from today’s level.

My verdict

The FTSE 100 contains plenty of dividend payers, but Unite is unusual in offering both income and long-term growth potential. Yes, property market challenges could linger, and the Empiric deal carries execution risk. But with the shares at a 52-week low, I think the losses look increasingly priced in.

While I do think there’s potential here, I’m not rushing to buy today. I’d like to see clearer signs of recovery in the UK property market before jumping in. Still, it’s worth considering – because if conditions improve, this FTSE 100 REIT could reward patient investors with both steady dividends and capital growth.

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