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Real estate investment trusts (or REITs) can be a great way to generate passive income over time. These real estate stocks are unique in that they pay out 90% or more of their rental earnings in dividends each year. This is in exchange for exemptions from corporate tax.

Please note that tax treatment depends on each client’s individual circumstances and may be subject to change in the future. The content in this article is provided for information purposes only. It is not intended to be, and does not constitute, any form of tax advice.

Here I would like to talk about three major credit institutions in particular: Tritax large box (London Stock Exchange: Box), Social Housing REIT (LSE:SOHO) and Supermarket Income REIT (LSE: super). With forward dividend yields of 5.6% and above, they certainly offer better near-term dividend potential than most companies. FTSE 100 index shares.

Read on to find out why it’s one of the top stocks to consider.

Triple top

Each of these stocks has unique advantages that make them ideal for long-term passive income. For the Tritax Big Box, these include:

• Diversified portfolio of approximately 700 assets.
• Exposure to long-term growth markets such as e-commerce.
• High quality tenant base e.g Amazon, Tesco and Iron Mountain.
• Low debt (loan-to-value ratio less than 33%).

A social housing REIT has different characteristics of its own, including:

• Focusing on the highly defensive specialist and supported social housing (SSH) market.
• Reduced risk of vacancy due to housing demand exceeding supply.
• Their tenants are housing associations or councils, which means that rents are supported by social care budgets.
• 100% of its contracts are linked to inflation.

Food for thought

Meanwhile, the Supermarket Income REIT benefits from:

• Its commitment to a largely recession-resistant food retail sector.
• A chain of major supermarkets including Tesco, Sainsbury’sWaitrose and Aldi on her books.
• Portfolio includes multi-channel stores, reducing the risks of online grocery.
• Exposure to a structural growth market with a rapidly increasing UK population.

So how do these qualities translate into dividend projections for the current fiscal years for REITs? Let’s take a look:

As you can see, the returns are the lowest Almost double present FTSE 100 index Average 3%. Social housing has never lowered its annual dividend, while supermarket income has raised it every year since listing on the London stock market in 2019.

So what next?

However, past performance is no guarantee of future returns. Dividends in each of these REITs can be affected by rising interest rates that lead to higher borrowing costs.

These companies can also face more specific problems. The recession may cause lower occupancy at some of Tritax’s logistics sites. Changes in subsidized housing financing may impact a social housing REIT’s earnings and dividends. Supermarket income may be affected if online shopping accelerates.

However, any passive income share an investor purchases comes with risk. Overall, I believe these REITs have the tools to continue to deliver market-beating dividends over the long term.