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Most people consider home ownership to be a good source of passive income, but few have the cash to cover the deposit, mortgage payments, and other costs needed to make that particular dream come true.
This is where REITs (real estate investment trusts) come in, allowing small investors to buy a share of a real estate empire and reap some of the rents from it.
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There are REITs covering a wide range of sectors, including farmland, shopping malls and warehousing.
My goal is to invest £1000 a year and get double that amount in passive income over 30 years.
Primary health properties
I am particularly attracted to Primary health properties (LSE:PHP), as the UK’s healthcare needs will continue to grow over the decades as the population continues to grow and age.
PHP has a portfolio of 523 healthcare facilities, which are mostly private medical practices. They also rent to NHS organisations, the HSE in Ireland, pharmacies and dentists.
In short, it’s not the kind of industry where defaults are likely, which means my money should be in good hands.
26 consecutive years of dividend growth!
Every year since the late 1990s, PHP has rewarded its shareholders with a bigger and bigger dividend payout.
Even during times as turbulent as the dot-com crash, the Great Recession and the Covid-19 crisis, PHP has lived up to its investors.
Of course, major unforeseen disruptions to UK healthcare policy could upset this impressive 26-year streak of year-on-year dividend growth – for example, if a radical left-wing government decided to nationalize health care providers. PHP assets.
Yet outside of this doomsday scenario, I’m confident that PHP will pay growing dividends come rain or shine.
Aiming to double my money with PHP
PHP paid a dividend of 4.6 pence per share in 2012, compared to 6.2 pence in 2021. Each year over this period, shareholders have seen the dividend grow by 3.3% on average.
Assume dividend growth continues over the next 30 years at the same rate, meaning that in 2052 the dividend per share will reach 17 pence.
If I bought £1,000 of PHP shares each year from 2023 to 2052 at today’s prices and reinvested the dividends, at the end of that period I would have accumulated £72,000.
This means that with the principal of £30,000 invested, I would have generated passive income of £42,000, or over £116 per month in my bank account.
Given that a report suggests the average Brit spends over £1,000 a year on cafe visits, cutting back on luxuries here and there so I can instead put my money to work for me in a solid dividend stock like PHP should be a non-brain.