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2 income shares I’d buy with $5,000 today

No matter what happens with the Australian stock market, or the economy, it’s nice to have some businesses in your portfolio that will be pretty consistent year to year with a bit of growth thrown in.

There are some companies like Invocare Limited (ASX:IVC) that fit the bill, but quite a few of the real estate investment trusts (REIT) on the ASX would fit this description too.

REITs usually earn regular rental income because so as long as they keep their properties tenanted there will be a regular flow of profits and distributions to shareholders.

Here are two of the best real estate property owners on the ASX in my opinion:

Rural Funds Group (ASX: RFF)

Rural Funds Group is the only ASX-listed agricultural real estate investment trust and it has a market capitalisation of $347 million.

It has a number of different types of farm types, including cattle, chicken, vineyards, almonds, macadamias and cotton. It has some major tenants including Select Harvests Limited (ASX: SHV) which leases some of the almond farms, and Treasury Wine Estates Ltd (ASX: TWE) which leases vineyards.

Rural Funds Group has rental increases built into a lot of its contracts which has allowed management to increase the distribution by 8% in FY17 and management have pencilled in a 4% increase for FY18.

With a 36.7% gearing ratio and a 78% payout ratio forecast for FY17, I think Rural Funds Group is in a strong position to continue growing through organic growth and acquisitions.

Rural Funds Group is trading with a forward dividend yield of 5.76% for FY17.

National Storage REIT (ASX: NSR)

National Storage REIT is a property business that is the biggest self-storage provider in Australia. It has a market capitalisation of $725 million and could keep growing well in the coming years.

With new residential property getting steadily smaller over the years, people have less space to store their items, so they’re more likely to use National Storage’s space. Thanks to the rising property prices across our capital cities, National Storage has been increasing its charge rate.

It currently has 108 centres across Australia and New Zealand and I expect will steadily increase the number over the years to come.

It’s trading with a dividend yield of 6.25%.

Foolish takeaway

I think these are two of the best REITs on the ASX, particularly Rural Funds Group. With a growing share price, acquisitions of more farms and increasing dividends there’s a lot to like. These aren’t the only two good income stocks though, even better is our number one dividend pick for 2017.


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Motley Fool contributor Tristan Harrison owns shares of InvoCare Limited, RURALFUNDS STAPLED, and Select Harvests Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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