But with the FTSE 100 trading near all-time highs, the index as a whole is only yielding around 3.1% today. That means £10,000 inside a Stocks and Shares ISA invested in a simple index tracker would generate just £310 a year in passive income.

That’s certainly nothing to scoff at. But with savings accounts offering similar yields at much lower risk, it’s hardly an exciting prospect.

However, for stock pickers willing to dig a little deeper, a portfolio could go on to earn considerably more.

What can stock pickers earn instead?

Take LondonMetric Property (LSE:LMP) as a compelling example to consider. With a current dividend yield of 6.6%, that same £10,000 investment would generate £660 a year in passive income – more than double the index.

Crucially, this isn’t a yield built on shaky foundations. LondonMetric is a specialist FTSE 100 real estate investment trust (REIT) focused on logistics, convenience retail, and healthcare properties.

Think last-mile delivery warehouses, supermarkets, and primary healthcare centres – the exact kind of essential real estate that keeps generating rental income regardless of the economic cycle.

What’s more, the business has built a portfolio of long-duration leases with built-in annual rent increases, typically linked to inflation. That means the income doesn’t just sit still. It grows year after year, compounding alongside the portfolio.

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 are the risks and rewards?

LondonMetric’s growth potential is rooted in structural tailwinds. The relentless growth of e-commerce continues to drive demand for last-mile logistics space, while the ageing UK population is creating sustained demand for healthcare properties.

While warehouses dominate its portfolio, LondonMetric is well-positioned in both.

There’s also a strong track record to point to. The company has grown its dividend every year since 2014, demonstrating management’s ability to continuously execute for over a decade.

That said, this is still a property business with meaningful debt on its balance sheet.

If interest rates end up staying higher for longer, it would drive up the group’s refinancing costs, squeezing free cash flow in the process. What’s more, if this higher rate environment is paired with a slowdown in demand, the simultaneous occupancy drop could put material pressure on rental cash flows and, in turn, dividends.

For income-focused investors, these risks feel manageable given the essential nature of LondonMetric’s assets and the quality of its tenant base. But they’re worth understanding before investing.

The bottom line

A £10,000 ISA can work considerably harder than a simple index tracker suggests. And with a 6.6% yield, a growing dividend, and exposure to some of the most structurally resilient property sectors in the UK, LondonMetric looks like a second income opportunity genuinely worthy of a closer look.

That’s why I’ve already added this stock to my passive income portfolio. And it’s not the only income opportunity I’ve spotted this week…

The post £10,000 in an ISA generates a second income of… appeared first on The Twelfth Magpie.

By trimming my expenses and saving just 10% a month, I aim to start building a decent investment pot via the stock market. Plus, by using a Self-Invested Personal Pension (SIPP) or ISA, any gains made on investments below £20,000 a year will be free of tax.

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.

How much income are we talking about?

For an investor earning a monthly UK salary of £2,600, a £260 monthly investment could compound nicely. Using the average FTSE 100 return of 9.5%, that could grow to £186,825 in 20 years. Based on the recommended 4% retirement withdrawal rule, that would bring in an extra £7,473 a year.

Got more time? Punch it up to 30 years and it could grow to £533,033, drawing down a much, much healthier £21,321 a year!

What stocks to look for?

The most popular income shares tend to share a few similar features:

• Long records of paying dividends, because that shows discipline and resilience.
• Strong cash coverage, so the dividend is backed by real money, not just accounting profits.
• Manageable debt, because heavy borrowing can put pressure on payouts when times get tough.

The aim is not just a high yield. It is a payout that can keep going through good years and bad. So what is one example of a dividend stock that fits that brief?

For reliability, the real estate investment trust LondonMetric Property (LSE: LMP) is one of my favourites.

Why LondonMetric Property?

LondonMetric looks appealing because it combines income with a long record of consistency. The current yield is 6.5% and it has an 18-year unbroken dividend track record.

Its most recent results also showed earnings and cash flow covering the dividend, which is exactly what income investors want to see.

A few points stand out:

• Dividend yield: usually between 5%-7%.
• Dividend growth: the annual dividend increased to 12p in the year to 31 March 2025, up 17.6%.
• Coverage: the dividend was 109% covered by earnings in FY2025, and the half-year update said it was 111% covered.
• Cash generation: net rental income rose sharply, helped by a strong portfolio and active management.

There are risks, of course. The balance sheet is not spotless, with liabilities exceeding current assets, so investors should not treat it as risk-free. Debt is supported by equity, but a downturn in the UK property market would still be a problem. That is why even good income shares should be just one part of a wider retirement plan.

Retirement income plan

A practical approach is to automate the process. If you save 10% of your monthly pay into an ISA or SIPP, then reinvest dividends for years, you give compounding a real chance to do its job. 

Over time, that income stream may help pay bills, cover travel, or simply reduce pressure on your pension. For many investors, that kind of second income is what makes retirement feel a lot more comfortable.

On balance, I think LondonMetric Property is worth considering for income investors because it offers a solid yield, a long dividend record and earnings support.

It isn’t flawless, but as part of a wider retirement portfolio, it could complement the many other dividend shares I’ve covered recently.

The post How to target a £21k second income for retirement with just 10% of your monthly salary appeared first on The Twelfth Magpie.

Fun fact: with a dividend yield of 6.48%, every £1,000 invested in this commercial landlord immediately unlocks £64.80 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.

An income machine with a proven track record

LondonMetric isn’t a typical landlord. As one of the UK’s largest commercial REITs, it owns a diversified portfolio of logistics hubs, healthcare centres, theme parks, and convenience stores.

Its tenants include household names such as Amazon and Tesco, among countless others that sign up to long-term leases that currently span an average of 17 years.

This type of mature tenant and duration of rental contract combine into a reliable, predictable, and recurring source of cash flow that’s powered a decade of continuous payout hikes. And with annual rental uplifts included across 67% of its leasing portfolio, LondonMetric’s currently on track to deliver its 11th year of higher dividends.

What the analysts are saying

It seems my bullish sentiment’s shared by a lot of other institutional analysts right now. As of 23 April, eight out of 10 experts have issued a Buy or Outperform recommendation. And on average, the consensus share price target stands at 230p per share.

Compared to where LondonMetric shares trade today, that implies that not only is there a juicy passive income opportunity, but a solid value one as well. With all that in mind, is this a guaranteed winner?

Sadly not. As all experienced investors know, even the most promising opportunities have their weak spots. And LondonMetric’s far from a risk-free investment. Building a real estate empire isn’t cheap. And as a result, LondonMetric has accumulated some significant debt over the years.

With just over £2.8bn of outstanding debts & equivalents, the company faced a bit of a credit crunch earlier this year, driven by a wave of rapidly approaching debt maturities.

This threat was ultimately eliminated after management refinanced £1.5bn of its loans. Nevertheless, the balance sheet remains leveraged. And as such, the business is still highly sensitive to changes in interest rates, which could not only have negatively impact on the excess cash generation that funds dividends, but also the underlying value of the property portfolio as well.

Is this a risk worth taking?

In my opinion, LondonMetric offers a genuinely compelling combination. It has financially strong tenants, long-duration rental agreements, and a prudent management team that continues to grow the business even with macroeconomic headwinds.

That’s a rare find. And it’s an opportunity that has me excited despite the risks. That’s why this commercial REIT already sits at the heart of my income portfolio.

The post Here’s how this REIT is supercharging my passive income stream! appeared first on The Twelfth Magpie.

This alone doesn’t guarantee large and growing dividends over the long term. But combined with other factors — like long tenant contracts and exposure to different sectors — it can make them formidable passive income providers.

This is shown by the stunning payout records of LondonMetric Property (LSE:LMP), Safestore Holdings (LSE:SAFE), and SEGRO (LSE:SGRO). Collective dividends across these three trusts have risen every year for more than three decades.

Want to know what makes them formidable dividend stocks? 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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

LondonMetric Property – 10 years of dividend growth

LondonMetric is a classic, rock-solid REIT. It has clients tied down on ultra-long contracts (current average lease term: 17 years). And its portfolio holds 670 different assets, meaning isolated tenant issues don’t impact profits at group level.

Yet this trust has an ace up its sleeve: it’s the UK’s largest triple net lease (NNN) REIT. It means the tenant and not LondonMetric is responsible for property taxes, maintenance costs, and insurance charges. Rents are lower as a result. But earnings visibility is much better, as unwelcome earnings shocks are better avoided.

The forward dividend yield here is 6.5%. I think it’s a great dividend share to consider, though, as with all property stocks, profits could come under pressure if interest rates rise.

Safestore Holdings – 12 years of dividend growth

Safestore is the UK’s largest self-storage specialist, one of the fastest-growing parts of the property sector. With 214 separate properties in its portfolio, dividends have risen strongly along with earnings for more than a decade. I’m confident the trust should keep delivering as factors like e-commerce, a rising domestic population, and changing consumer habits drive market growth.

There is a drawback here, however. Unlike LondonMetric, this company only focuses on one sector, which creates greater concentration risk. By comparison, the other REIT I’ve described has exposure to logistics, healthcare, leisure, and retail.

On the other hand, it is better diversified by region — as well as the UK, it owns dozens of assets in Mainland Europe, which sets it apart from most other British REITs. Its forward dividend yield is a healthy 4.7%.

SEGRO – 12 years of dividend growth

SEGRO has an even better dividend yield, at 4.8%. It also has a dozen straight years of dividend growth behind it, helped by its focus on warehouses and logistics assets.

This has driven profits steadily higher, as the growth of online shopping and post-pandemic supply chain changes have supercharged demand. The subsequent shortage in available properties has meant SEGRO’s enjoyed robust rental growth. This shortfall looks set to last too, underpinning future earnings and dividends.

There are a couple of other reasons why I like this FTSE 100 stock. Its expansion into data centres provides added growth opportunities. It also has an expanding portfolio in Continental Europe to complement its UK base.

Rent increases may be harder to come by during economic downturns. But I’m still expecting SEGRO to be one of the UK’s best-paying REITs.

The post 34 years of dividend growth! 3 top REITs to target income appeared first on The Twelfth Magpie.

For income investors with a patient mindset, compounding gains over several years helps to build wealth. But which avenue can reach this goal faster?

Weighing up both sides

With a competitive interest rate, a Cash ISA offers a predictable return that isn’t at the mercy of market swings or dividend cuts. Further, the interest paid isn’t subject to tax. In volatile periods, like we saw earlier this year in the stock market, the stability of not having capital at risk can be very appealing.

Please note that tax 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.

But let’s not get carried away. Even though the index average might be lower than some Cash ISA’s, a carefully picked selection of stocks from the index can raise the yield for a portfolio comfortably above 6%. Therefore, that provides a better return than the ISA, even with the added risk.

The other powerful argument for stocks is that the dividend yield isn’t the only way to build wealth. Dividend shares offer not just income, but growth. Many companies increase their payouts over time and, crucially, their share prices can rise as well. Reinvested dividends can supercharge compounding in a way cash simply can’t replicate. For money in a Cash ISA, it doesn’t have any potential to enjoy capital appreciation beyond the interest being paid on it.

So although there are pros and cons for both options, I think on a risk-adjusted basis, dividend shares offer a more compelling (and likely faster) way to build up wealth over time.

Dividend delight

One example of a stock that could be included in the portfolio is LondonMetric Property (LSE:LMP). The share price is flat over the past year, with a dividend yield of 6.51%. Interestingly, the yield hasn’t fallen below 5.5% at all over the last year.

It’s a real estate investment trust (REIT) that owns a large portfolio of UK properties, particularly in high-demand areas like logistics warehouses and healthcare sites. These are typically let out on long-term leases, where tenants cover most property costs. That creates a steady, predictable stream of rental income.

It’s that income model that helps explain why the dividend looks relatively sustainable. The company boasts high occupancy (around 98%) and long leases averaging well over a decade, locking in cash flow visibility. On top of that, net rental income has been growing strongly, jumping to more than £450m for the full year ended in March.

Encouragingly, the dividend’s been increased for more than a decade, with another rise expected this year. Even better, earnings broadly cover the payout, suggesting it isn’t being funded unsustainably through debt.

Looking ahead, the outlook appears positive. Demand for logistics properties remains strong, and is an area I expect will keep growing. In terms of risks, it’s highly sensitive to interest rates. When rates rise, borrowing costs increase and property valuations can come under pressure.

Even with that, I believe it’s a good stock to consider as part of a dividend investor’s strategy.

The post Cash ISA vs dividend shares: which builds wealth faster? appeared first on The Twelfth Magpie.

As a newish shareholder, I’m certainly hoping this is the case. However, the first few weeks have been a bit of a bumpy ride, with the share price down 10.6% since late February.

That was when the Iran war started and inflation spiked, sending real estate investment trusts (REITs) like Londonmetric tumbling. The good news for new investors though is that this pullback has pushed the dividend yield up to 6.5%.

Here’s why I reckon the dip’s worth considering buying for 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.

Structurally advantaged

Londonmetric owns a £7.6bn portfolio containing 680 properties that currently generate over £450m in annual rent. These assets are in what it calls the “structurally supported sectors” of urban logistics, entertainment and leisure, convenience, and healthcare.

Top occupiers include Ramsay Health Care, Merlin Entertainments, Travelodge, Marks and Spencer, and Tesco. Due to the high quality and reliability of these tenants, Londonmetric boasts an impressive 98% occupancy rate.

What I like here is the REIT’s triple-net lease (NNN) structure. This is where the tenant takes on nearly all the financial responsibilities of the property, including insurance, tax, and maintenance costs.

Looking ahead, I’m optimistic that Londonmetric can build on its 11 years of rising dividends. Its average lease duration is 17 years, with 67% of rent having contractual uplifts in place.

These strong fundamentals should provide the stable, long-term cash flows to maintain a growing dividend.

Risks to be mindful of

As optimistic as I am however, there are a couple of key risks that I need to bear in mind. The main one is the prospect of higher-for-longer interest rates, which could make growing the portfolio more expensive, as well as raising debt refinancing costs in future years.

Another risk is a severe UK recession one day that heaps financial pressure on tenants. While I don’t envisage the likes of Primark and Amazon going anywhere, they could be forced to downsize if things got really ugly in terms of weak consumer spending.

Finally, Londonmetric has grown aggressively through acquisitions in the past couple of years, consolidating the REIT sector. However, there’s always a risk it overpays in future if it carries on with this strategy. And that might threaten the rate of dividend growth.

Passive income potential

For now though, everything seems to be on track. A recent trading update showed that rent increased around 16% to over £450m in the year to 31 March. And it snapped up four modern Premier Inn hotels for £47.8m.

CEO Andrew jones said: “Our all-weather portfolio continues to deliver excellent income growth as we benefit from our alignment to the winning sectors. We are reaping the rewards of this strategy, and it is wonderfully comforting to see our rental income flowing and growing to record levels.”

At the current price of 192p, £5k would buy around 2,603 shares of this REIT. And based on the current yield, they would collectively generate £325 in passive income.

The post £5,000 buys 2,603 shares of this FTSE 100 stock that now yields 6.5% appeared first on The Twelfth Magpie.

What this means in cash terms depends on someone’s earnings and their employment status. But a typical worker earning £45,000 a year will pay £2,593 in NI this tax year.

In other words, £90,755 (£2,593 a year for 35 years) could unlock an annual pension of £12,548. Someone enjoying 25 years of retirement could receive £313,700. This is a tremendous return but, unfortunately, it isn’t enough to provide for a comfortable retirement.

However, a SIPP (Self-Invested Personal Pension) could help bridge the gap. Let me explain.

One possible approach

According to Pensions UK, a single person needs an annual income of £43,900 to enjoy a comfortable retirement. And by investing in a SIPP, I think it’s possible to produce a nest egg large enough to provide the additional £31,353 needed to supplement the State Pension.

Of course, the size of an individual’s pension pot will be determined by the amount invested, for how long, and the rate of return. For example, if someone invested £2,593 a year for 35 years — and achieved an annual return of 8% — they would have a SIPP worth £482,562.

At this point, a portfolio of dividend shares paying 6.5% a year, could produce an annual income of £31,366. Alongside the State Pension, this should be enough to have a decent retirement.

Something to consider

One stock that’s yielding 6.5% at the moment is LondonMetric Property (LSE:LMP). It owns a £7.4bn portfolio of 683 property assets, in what it describes as “structurally supported” sectors. The group avoids investing “where income security and growth is less assured”. This means the majority (54%) of its assets are in the logistics industry.

Presently, its annual contractual rental income is £420m.

A special status

As a real estate investment trust (REIT) it has to return at least 90% of its rental profit to shareholders each year by way of dividend. Otherwise, it loses certain tax advantages. Generally speaking — no guarantees, of course — this means LondonMetric Property should offer an above-average yield. Conventional trading companies are unlikely to have a payout ratio of 90% or more.

However, there’s a potential threat to its earnings if interest rates remain higher for longer. By having to return such a high proportion of profit to its shareholders, the group’s forced down the route of having to take on debt to buy properties.

Not only would a higher interest rate environment increase borrowing costs, it could also limit future access to finance and, therefore, restrict growth.

Also, the UK commercial property market’s highly cyclical. Tenants going bust is an ever-present risk.

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. 

Final thoughts

However, LondonMetric Property has a strong track record of raising its dividend. It also has a 98% occupancy rate, which reflects the quality of its portfolio.

I also like its emphasis on triple net leases. Under these types of agreements, the tenant is responsible for maintenance costs, insurance, and property taxes, as well as the rent. This reduces the level of the operational risk faced by the group.

That’s why I think it’s a stock worth considering by those looking to boost their income, whether in retirement or earlier in life.

The post Want to aim for £31,353 more than the State Pension? A SIPP could be the answer appeared first on The Twelfth Magpie.

When held inside an ISA, REITs can generate chunky dividend yields from rental property for shareholders who don’t have to worry about paying any taxes. That’s quite the opposite compared to a direct investment in a property, which also comes with all the extra costs of repairs and managing tenants.

This doesn’t mean buy-to-let’s dead. It’s still a good way for experienced landlords to profit from the UK property market. But with new rules coming in this year, there’s no denying that it’s becoming harder.

That’s why REITs remain my favourite way to invest in real estate. And in 2026, there’s one REIT in particular that looks like an excellent investment, in my eyes.

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 tasty 6.6% dividend yield

Out of all the REITs listed on the London Stock Exchange, my personal favourite right now is LondonMetric Property (LSE:LMP).

The firm’s vast commercial real estate portfolio covers a wide range of property types, including healthcare, convenience, entertainment, and a large concentration in urban logistics. But what makes its business model unusually robust is its triple-net lease (NNN) structure.

NNN means that tenants are ultimately responsible for paying rent, maintenance, insurance, running costs, and taxes like business rates. As such, beyond the initial cost of acquiring or building a property, LondonMetric has virtually no property-level operating costs, turning it into a free cash flow-generating machine.

This structural advantage is a big reason why the business is on track to deliver its 11th year of consecutive dividend increases. And even in April, with a chunky 6.6% dividend yield, the group’s rental cash flows are still more than enough to cover its substantial payout.

Pair that with an average lease duration of 16.4 years, 98% occupancy, and 67% of lease agreements including an annual contractual uplift, and LondonMetric’s dividends look exceptionally secure.

So what’s the catch?

Where is the risk?

Even as a bullish shareholder, LondonMetric Property isn’t a risk-free REIT, and there are some important risk factors that investors need to consider carefully.

The company carries a lot of debt on its balance sheet. And while management has recently refinanced £1.5bn of its outstanding loans to remove maturity risk until 2029, interest rates also impact the group’s property valuations.

Changes in real estate prices don’t impact its rental cash flows. But it does nonetheless move its share price.

Another potential risk factor is over-expansion. In the past, LondonMetric focused exclusively on logistics properties. But following its acquisition of LXi, a wide range of new property types were thrown into the mix.

Yet with a limited history and experience of being a landlord to supermarkets, hotels and theme parks, the impact of poor execution in the short-term could have a noticeable impact in the long run.

Are these risks worth taking?

Every investor has their own personal risk tolerance limit. So before buying any shares in LondonMetric, it’s crucial to consider both the risks and potential rewards.

For me personally, the combination of rock-solid fundamentals paired with a juicy 6.6% yield makes LondonMetric a REIT worth buying. That’s why it’s already in my passive income portfolio.

The post I’m ignoring buy-to-let in 2026 and buying this REIT for passive income! appeared first on The Twelfth Magpie.

This means that beyond buying and holding shares, shareholders don’t have to do any of the work of finding tenants, maintaining properties, or dealing with contractors.

Best of all, with higher interest rates making real estate less popular, there are some enormous dividend yields on offer right now. And it’s why I’m eager to buy more shares in one REIT that’s already in my income portfolio.

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.

A hidden compelling opportunity

Out of all the REITs on the London Stock Exchange, it’s LondonMetric Property (LSE:LMP) that stands out as my personal favourite.

The REIT owns and manages 680 commercial property assets across a combined £7.4bn portfolio, specialising in triple net leases (NNN) rental contracts. That means it’s the group’s tenants that are responsible for maintenance, insurance, and taxes in addition to paying rent.

The result? LondonMetric is enormously cash generative and diversified across multiple sectors, including urban logistics, retail, healthcare, hotels, and even a few theme parks.

Digging a bit deeper, its long list of tenants include Amazon, Tesco, and Marks & Spencer, among others, almost all of which deal in long-duration lease agreements.

For LondonMetric, this enterprise-scale clientele means that, beyond having reliable tenants that pay on time, the group also benefits from 98% occupancy and a 16.4-year average lease duration from capital-light lease agreements that contain annual contractual uplifts.

All in all, by combining a steady expansion of its property portfolio with higher rental income from its existing tenant base, LondonMetric is on track to deliver its 11th consecutive year of dividend increases. And with the shares trading at a 6% discount to its net asset value, the REIT currently pays a chunky 6.7% dividend yield.

Too good to be true?

As dividend stocks go, LondonMetric ticks almost all the boxes.

• It’s a highly cash-generative business with a reliable and sticky customer base.
• Dividends have been steadily and consistently increasing while still being covered by underlying earnings.
• The shares trade at a discount to their intrinsic value, offering a higher yield.

But even the most promising income opportunities have their weak spots. And in the case of this business, those weak spots are acquisition integration risk and debt.

As a serial acquirer of other smaller commercial landlords, LondonMetric has vastly expanded its portfolio in recent years. And just last month, management started targeting another REIT (Picton Property Income) in a joint bid with Schroder REIT to further expand its empire.

So far, this strategy has proved quite lucrative, transforming the business into the second-largest REIT on the UK stock market. But acquisitions are expensive and can backfire if rental performance later fails to live up to expectations.

This risk is only amplified by the firm’s substantial pile of outstanding debts. While management did recently refinance a large chunk of its loan obligations, granting some valuable financial flexibility, leverage needs to be monitored carefully, especially if interest rates start rising again.

Nevertheless, with a proven leadership team and a high-quality property portfolio, the risk looks well worth the potential reward to me. That’s why LondonMetric is on my personal buy list right now.

The post Here’s the REIT I’m buying for huge and sustainable passive income appeared first on The Twelfth Magpie.

Finding the right investments is key to generating strong returns. But not having to pay tax on dividends is also a big help.

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. 

REITs

Real estate investment trusts (REITs) are a terrific asset class. They’re literally designed for passive income investors. They originated around 65 years ago in the US. Property prices were rising and ordinary people were struggling to keep up. 

Sound familiar? The government’s plan to do something about it was to create a new asset class to help people own property.

REITs are organisations that own and lease property. And they’re exempt from paying tax on the income they generate. 

In exchange, they have to return 90% of their income to investors as dividends. So ordinary people get a way to earn passive income from property.

This basic structure hasn’t really changed since 1960. And some REITs currently come with very attractive dividend yields. 

UK property

LondonMetric Property (LSE:LMP) is one example. The stock comes with a 6.5% dividend yield, but this isn’t what makes it interesting. 

Growth is often difficult for REITs. Since they pay out almost all of the cash they generate, they can’t use it to buy more properties.

LondonMetric, however, has done a good job of working around this. Over the last few years, it’s acquired several other REITs. The strategy involves incorporating the best assets and selling the others. In doing so, the firm grows and strengthens its portfolio.

It’s a risky strategy. Financing these deals involves taking on debt or issuing shares and sale prices for divestitures aren’t guaranteed.

The result, however, has been consistent dividend growth. And that makes it well worth checking out for passive income investors.

Monthly income

The annual contribution limit for a Stocks and Shares ISA is £20,000. To earn £100 a month on that requires a 6% yield. 

LondonMetric Property shares come with a better starting return than this. But there are a couple of things to note. 

One is that the firm pays dividends quarterly. So anyone looking for cash each month will also need other investments.

Another is that investing heavily in any one company is risky. And this is especially true for anyone starting from scratch. 

The solution to both problems is the same. It involves finding more than one stock to buy, while looking for a 6% average yield. 

The good news is this is absolutely possible in today’s stock market. LondonMetric Property is only one of the names worth considering.

From 0 to £100 a month

I think investors targeting passive income should look at REITs. This is, after all, exactly the purpose for which they were originally designed.

UK REITs have been attracting a lot of attention recently. And rightly so – a number of them combine high yields with consistent returns. 

In my view, there are still several names that are worth considering. LondonMetric Property is one, but I think there are others. 

Using a Stocks and Shares ISA, someone starting from scratch can earn £100 a month or more. The key is knowing what to look for.

The post How to turn an empty ISA into £100 a month in passive income appeared first on The Twelfth Magpie.