Primary Health Properties (PHP) continues to deliver on its dividend growth promises, come rain or shine, proving it deserves a place in the portfolios of those chasing hard currency income.
The UK-based real estate investment trust (Reit) last week increased dividends by 3% for the six months to June, cementing a 28-year track record of uninterrupted dividend growth.
Adjusted earnings per share are up 2.3%. Importantly, the portfolio is virtually fully let with a vacancy rate below 1%.
Nicolas Lyle, property analyst and portfolio manager at Stanlib, describes PHP as a “dividend king”. He says the only other JSE-listed property stock that comes close to its multiyear track record of consecutive dividend growth is Germany-focused business park owner Sirius Real Estate.
PHP, which is a FTSE 250 constituent and has been listed on the London Stock Exchange (LSE) since 1995, became the JSE’s first specialist health-care property counter in October 2023.
The company owns a portfolio of 516 buildings in the UK and Ireland worth £2.8bn. Most of its properties are let to GPs, day surgeries, pharmacies, dentists and other health-care providers.
PHP differentiates itself from other JSE-listed Reits by making quarterly payouts — most others declare dividends twice a year.
Though PHP is regarded primarily as an income play, recent advances on Assura, a fellow UK health-care Reit, have also created capital growth upside. London-listed Assura made its JSE debut in November last year and has a similar portfolio to PHP’s, spanning 603 buildings worth £3.1bn.
Assura became the subject of corporate action in February when investment firm Kohlberg Kravis Roberts & Co, together with Stonepeak, announced takeover intentions. In June, PHP made revised counteroffers, which the Assura board later recommended to shareholders.
Assura shareholders have until August 12 to accept PHP’s offer. Approval hinges on 50%+1 of the voting shares. If completed, the transaction will more than double PHP’s portfolio size, pushing it well beyond R100bn.
It will also place PHP as the JSE’s third-largest property stock with a market cap close to R72bn — behind rand hedge heavyweights Nepi Rockcastle at R99bn and London-focused Shaftesbury Capital at R74.5bn (given share price levels earlier this week).
Our long-standing partnerships across the NHS give us a strong foundation to support this transition and deliver value to our shareholders.
— Mark Davies
Lyle says a successful takeover of Assura will create scale, which will give PHP a more diversified health-care portfolio and better access to future acquisitions, especially of larger assets.
Other benefits will include improved cost of capital, operational synergies and savings. In addition, a bigger, combined entity will translate into increased benchmark weightings and share liquidity, which will place the stock on more investor radars — and ultimately support the share price.
Trading in both Assura and PHP has been buoyed by corporate action in the first half of 2025. Assura was the best-performing stock on the JSE, with a total return of 44.9%.
PHP clocked a total return of 15.3% over the same period, comfortably ahead of the all property index’s 6.2%, according to equity research firm Golden Section Capital.
Analysts say even if the Assura takeover doesn’t get the go-ahead, there are still plenty of reasons South African investors should own PHP shares.
The company’s single-sector focus on health care provides an offshore diversification opportunity unlike any of the JSE’s other rand hedge offerings, says Lyle.
More importantly, the stock offers one of the most defensive and stable income streams in the sector, given that the bulk of PHP’s income is backed by the UK and Irish governments.
The UK’s National Health Service (NHS) and its Ireland counterpart, the Health Service Executive, fund about 90% of the rentals paid by medical practitioners.
The counter is attractively priced and trades at a 9%-10% discount to NAV and forward NAV estimates (at this week’s 96p a share).
Lyle says that places PHP at a 12-month forward earnings yield of 7.5%, of which 100% is paid out as a dividend. Distributions should continue to increase by an estimated 2%-3% a year, which provides investors with a decent total income return of almost 10% a year — in sterling.
He adds that further interest rate cuts in the UK will support both profit margins and NAV growth.
The only downside is that there’s very little trade in PHP’s shares on the JSE because the company has yet to issue shares in South Africa.
Still, Lyle believes that’s not a problem, as local investors who want to trade PHP shares can do so via brokers on the LSE, with shares fungible with the JSE.
“It just means slightly longer settlement periods, exposing investors to greater than normal exchange rate risk.”
Corporate action aside, PHP’s long-term investment case has been bolstered by recent changes to the Labour government’s health-care policies, which aim to address challenges posed by an ageing population and a critical shortage of community-based facilities.
Referring to the government’s 10-year health plan, published in early July, PHP CEO Mark Davies said in a trading update that the commitment to strengthen the NHS through a shift to primary care facilities embedded in local communities — away from large, regional hospitals — plays directly to PHP’s strengths.
“Our long-standing partnerships across the NHS give us a strong foundation to support this transition and deliver value to our shareholders.”
He added that new “pools of capital” have come to the fore as global infrastructure funds, pension funds and life assurance companies look to add health-care real estate to their investment portfolios.
“Health-care properties are increasingly viewed as attractive social infrastructure assets with a growing rental income stream considered secure, long and predictable,” Davies said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.