2 dividend shares to buy hand over fist

Stephen Wright thinks a UK healthcare REIT and a US bank are dividend shares that investors looking for passive income should be targeting aggressively.

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Dividend shares can be a great source of passive income. But as with any investment, it’s important to be careful when buying income stocks.

When I invest in dividend shares, I try to follow Warren Buffett’s approach. Rather than steadily investing in the same companies each month, I look to be aggressive when I think there’s an unusually good opportunity.

Right now, there are a few stocks on my radar. And I’m looking to buy them hand over fist when I have cash available. 

Primary Health Properties

Top of my list is Primary Health Properties (LSE:PHP). The company makes its money by leasing primary care properties in the UK. 

The shares are trading at a steep discount to where they were a year ago. The share price has fallen by 30% over the last 12 months and the stock has a dividend yield in excess of 6%. 

Created with Highcharts 11.4.3Primary Health Properties Plc PriceZoom1M3M6MYTD1Y5Y10YALL15 Apr 201815 Apr 2023Zoom ▾Jul '18Jan '19Jul '19Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '232019201920202020202120212022202220232023www.fool.co.uk

Despite this, the company is performing well according to a couple of key metrics. Its occupancy rate is above 99% and it has collected 98% of the rent it was due so far this year.

In other words, the business is still generating strong cash despite its falling share price. Its rental income is actually growing, as a result of heavy investment in its properties. 

No investment is ever risk-free, though, and there are a couple of things investors will want to keep an eye on. The biggest of these, in my view, is the company’s balance sheet.

Refurbishing and extending its properties has required capital and, with the company distributing its income as dividends, it has had to take on significant debt to do this. With interest rates rising, that might be a concern.

Overall, I think the stock is just too cheap to miss at today’s prices. If I had cash available, I’d be looking to buy as much of it as I could.

Citigroup

There’s a lot of uncertainty around Citigroup (NYSE:C) at the moment, which is weighing on the company’s share price. But I think this makes it a bargain that is too good to pass up right now.

Citigroup’s share price has fallen by 7% over the last year, meaning the stock currently has a dividend yield of around 4.5%.  But the company has also been buying back its own shares, offering investors an additional return.

Created with Highcharts 11.4.3Citigroup PriceZoom1M3M6MYTD1Y5Y10YALL15 Apr 201815 Apr 2023Zoom ▾Jul '18Jan '19Jul '19Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '232019201920202020202120212022202220232023www.fool.co.uk

The stock has been faltering for a couple of reasons, but the main thing it comes down to is the company’s low return on equity. This measures a bank’s ability to generate a return on its customer deposits. 

Citigroup has historically lagged its peers on this score. The company is selling off several of its less efficient operations to improve its overall performance, but there’s a risk this might be expensive and have limited effect.

Even with the uncertainty over the outcome of its restructuring, I think the share price is just too cheap. I’ve been buying the stock aggressively over the last year or so and I expect to continue.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Stephen Wright has positions in Citigroup. The Motley Fool UK has recommended Primary Health Properties Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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