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Primary Health Properties (LSE: PHP) has provided superb passive income through 28 consecutive years of dividend rises, and we’re looking at a 7% dividend yield forecast for 2026. And that should rise to 7.3% by 2027 to mark 31 years of increases, if current forecasts are accurate.
What’s more, looking at earnings forecasts for the next few years, I see a decent chance for share price growth from this real estate investment trust (REIT), too.
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Real estate weakness
The above chart shows the share price hasn’t had a great five years. But that seems largely due to the downturn in real estate sentiment among investors. With interest rates high and mortgages expensive, everything from builders to brickmakers have suffered. Has the market overreacted? I think so, and with share prices depressed, I rate 2026 as a great time to consider buying.
In the case of Primary Health Properties, we’re looking at medical centres and related health establishments. They’re leased on long-term contracts, with the NHS a major client. As part of that, much of its rental income is tied to inflation. And with most of its rents backed by government, I find it hard to think of a more defensive passive income investment.
Steady dividends
The trust’s client base also helps with another thing. REIT rules mean Primary Health has to pay at least 90% of its rental profits in dividends. In any other commercial rental business, that could put the dividend at serious risk. Just think about retail centres and office buildings hit by economic downturns.
This doesn’t guarantee the annual payout — no dividend ever can be guaranteed. Anything dependent on the NHS is always at the mercy of political change. Weak property prices, coupled with high loan interest, can also be a bit of a burden. And property is something that could keep some investors away for some time.
Fears overdone
But I reckon fears related to property valuations are overblown. At 30 June 2025, the company had a loan-to-value ratio of 48.6%. And its average cost of debt was a fairly modest 3.4%. Net financing costs in the half came to £25.7m, which still left a very healthy £61.9m profit before tax.
At the time, CEO Mark Davies spoke of “a pivotal time for our sector“. He added: “The improving rental growth outlook and a stabilisation of our property yields at 5.25% signal that we’ve moved through a key inflexion point in the property cycle with a very encouraging outlook ahead.“
Acquisition success
I’m also optimistic about the long-term success of Primary Health’s acquisition of Assura. In October, the Competition and Markets Authority concluded there are no competition concerns. It means the two businesses can be fully integrated. And that could save at least £9m in cost efficiencies.
All in all, I think the current valuation of Primary Health Properties — with a forecast price-to-earnings (P/E) ratio of under 10 — is enough to offset the property-related risk. And it could be one of the best for passive income investors to consider in 2026.
