I’m searching for the best investment trusts to buy for next year. Should I buy these high-yield ones to boost my passive income?
Property stocks like Regional REIT (LSE:RGL) can be great investments to own during economic downturns. Their dependable rental incomes can allow them to provide better dividends than those offered by the broader market.
Buying real estate investment trusts (REITs) can be a particularly good idea for passive income too. This is because such stocks are required to pay out at least 90% of annual profits in the form of dividends.
This means, for example, that Regional REIT carries a huge 11.3% dividend yield for 2023.
Yet despite this, I’d much rather buy other REITs for my own shares portfolio. This is because of the stock’s overwhelming focus on the office sector.
I’m concerned about the prospects of long-term dividend growth here as the UK economy struggles. Post-Brexit troubles and major structural issues (like low business investment and weak productivity) are huge threats over the next decade.
On top of this, I think demand for Regional REIT’s properties could slip as remote and hybrid working practices become ever more popular. A whopping 22% of all British workers operated from home at least once a week in September, latest government data shows.
The company’s focus on regional centres could help it perform more resiliently than other office space providers. Investment outside London is tipped to improve strongly over the next decade. But, on balance, I think there are more attractive investment trusts for me to buy today.
abrdn European Logistics Income
The growth of working from home is a possible threat to Regional REIT then. But I think it provides abrdn European Logistics Income (LSE:ASLI) investors with a chance to turbocharge their returns.
As its name implies, this investment trust is focused on logistics and warehouse assets on the continent. In total, it owns 27 assets across Germany, France, Spain, The Netherlands and Poland.
Buildings like these play a critical role in allowing companies to get their products to customers. Demand for such distribution hubs is set to grow strongly as e-commerce goes from strength to strength.
At the same time, the construction pipeline for these assets remains weak. This means the rents the trust can charge its tenants could keep rising strongly for years to come.
I also like abrdn European Logistics Income because of its wide geographic footprint. This reduces its dependency on strong economic conditions in one or two territories. It also gives the trust exposure to fast-growing Eastern Europe.
However, a lack of acquisition targets could damage its growth strategy. But at the moment the business isn’t suffering from a shortage of quality options. It snapped up three French assets and one Dutch warehouse in the three months to September alone.
I feel this property investment trust could be a good buy for me in 2023, helped by its enormous 7% dividend yield.