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We’re all looking for ways to boost our passive income in 2025 and beyond. Here are two dividend shares that I think deserve a close look.
The PRS REIT
Market conditions remain rock-solid in the residential rentals market. In fact rental growth’s accelerating, which bodes well for real estate investment trusts (REITs) like The PRS REIT (LSE:PRSR).
According to Rightmove, average monthly private rents increased 9.1% in the 12 months to November. At £1,319 a month, growth sped up from 8.7% in October. Last month’s rise was also just off March’s record high of 9.2%.
Britain’s homes shortage is driving rents through the atmosphere. And it’s showing no signs of letting up amid a rising national population, weak housebuilding activity, and an growing exodus of buy-to-let investors.
Fresh research from the National Residential Landlords Association shows 31% of private landlords plan to sell up in the next two years. That’s up from 22% three years ago and 18% in 2018.
Shortages are especially pronounced in the family home segment, the area of choice of PRS REIT.
Against this backdrop, City analysts think the company’s earnings will rise 11% this financial year (to June 2025). Healthy growth of 8%’s predicted for the following year too. As a result dividends are expected to rise steadily over the period. This results in above-average dividend yields of 4% and 4.1% for fiscal 2025 and 2026 respectively.
Such projections reflect REIT rules that govern dividends. In exchange for certain tax breaks, these trusts must pay at least 90% of rental profits each year out in the form of 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.
Investing in property stocks is riskier than usual in the current inflationary climate. Stubborn inflation may encourage the Bank of England to keep interest rates above recent norms, depressing net asset values (NAVs) and pushing up borrowing costs.
But on balance, I think the potential benefits of PRS REIT shares outweigh the risks and they’re worth considering.
Schroder European Real Estate Investment Trust
My second selection — the Schroder European Real Estate Investment Trust (LSE:SERE) — is, as the name implies, another property stock.
This particular company owns retail, industrial and office assets across Continental Europe. More specifically, it lets out properties in high growth regions and cities such as Paris, Berlin, Frankfurt and Hamburg.
This diversification by sector and country allows it to spread risk while also harnessing multiple investment opportunities. In its own words, it focuses on places that “offer a competitive advantage in terms of higher levels of GDP, employment and population growth; differentiated local economies with higher value industries; well-developed infrastructure; and places where people want to live and work“.
A sluggish eurozone economy could harm its share price next year. But an attractive long-term outlook makes the trust worth serious consideration, in my opinion.
Oh, and at current prices its dividend yields for 2025 and 2026 are a chunky 9%.
