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2 dirt-cheap dividend shares I’d buy for long-term passive income

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I don’t have limitless reserves of cash to spend on UK shares. But here are two UK dividend shares I’d buy with spare capital to invest.

Empiric Student Property

Real estate investment trusts (REIT) can be terrific stocks for income investors. This is because they are obligated to distribute a minimum of nine-tenths of their profits out in the form of dividends.

Empiric Student Property (LSE:ESP) is one such property share I’m considering investing in today. As its name implies, the company is focused on providing accommodation to university students. This is a market that is undersupplied and therefore one in which rents are growing strongly.

Empiric’s latest financials showed its average weekly rents for the 2022/23 academic year rise 5.2% on a like-for-like basis. Occupancy grew to a record high of 98%, meanwhile, illustrating the scale of the market’s supply and demand imbalance.

The business is expecting a rise of at least 5% in the current academic period, too. This explains why City analysts are so bullish on the REIT’s earnings outlook.

Current forecasts suggest earnings will boom 32% year on year in 2023. This leaves Empiric trading on a price-to-earnings growth (PEG) ratio of just 0.2. This is well inside the value yardstick of one and below.

This robust projection leads analysts to predict strong annual dividend growth, too, and a market-beating 4.2% dividend yield.

There’s a possibility that long-term earnings here could suffer if changes to student immigration rules come into force. In recent months, the Home Office has floated the idea of limiting the number of overseas students. However, I believe this risk is baked into Empiric’s ultra-low valuation.


The UK is also suffering from a massive shortage of family homes in the rental sector. This means that income at The PRS REIT (LSE:PRSR) also continues to steadily increase.

Rental income here rose 5.7% on a like-for-like basis in the three months to December, most recent financials showed. Total occupancy also stood at a rock-solid 97%.

I’m expecting private rents to keep increasing too as supply fails to keep up with demand. In fact data from property data business TwentyCi shows that the number of new instructions slumped 7.8% in 2022 as the exodus of buy-to-let investors continued.

I think PRS could be a great defensive stock to own for the current climate, too. Thats despite the risk that elevated construction costs pose to profits.

Spending on rent is one thing that remains broadly stable at all points of the economic cycle. So I’m backing PRS’ rent collection to remain solid despite the threat of recession.

Like Empiric Student Property, this REIT trades on a PEG ratio of just 0.2. It also carries a healthy 4.5% dividend yield for the financial year to September 2023. I think both these value shares could be great sources of long-term passive income.

The post 2 dirt-cheap dividend shares I’d buy for long-term passive income appeared first on The Motley Fool UK.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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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