Which are the better smaller and FTSE 250 dividend shares to buy in 2023? Here are two real estate sector income picks that could supercharge passive income over the long term.

Grit Real Estate Income Group

A diversified pan African real estate owner, Grit (GR1T.LN) has had a a tumultuous share price performance over the last 18 months. The Group is on track to complete the acquisition of a controlling stake in developer Gateway Real Estate Africa (GREA) by May next year, which would unlock considerable potential for NAV and income growth.

The recent major restructuring of its debt and plans to further reduce its LTV have put the group on a firm financial footing. Meanwhile, the re-establishment of its dividend track record should contribute to a re-rating of its share price (which currently trades on a 49.5% discount).

Grit paid a dividend for the financial year to 30 June 2022 of 4.5 US cents per share. It has historically had one of the largest dividend yields of property companies listed on the LSE, distributing 12.20 US cents per share in 2019 but decided to stall dividends over the Covid period. Once Grit’s dividend track record is firmly re-established (current dividend yield of 11.1% and board guidance of a dividend of between 4.5 cents and 5.5 cents per share for the year to 30 June 2023), a re-rating of the share price should follow.

Tritax EuroBox

Tritax EuroBox’s (LSE:EBOX) share price has fallen even more sharply recently. In fact, it’s down a whopping 44% during the past 12 months. As a consequence, the property company sports an enormous 9.4% dividend yield for this financial year (to September 2023) based on current forecasts.

As a dividend investor, this sort of sky-high reading hard to ignore.

The FTSE 250 firm operates warehouses and logistics hubs in major European economies including Germany, France and Spain. It’s fallen as worries over these countries entering deep recessions have grown, conditions that could damage demand for commercial properties like these.

Tritax EuroBox has also fallen on speculation that the e-commerce bubble has burst. Lower online retail activity would be especially damaging for this part of the property sector.

But as a long-term investor, the company’s share price collapse provides an attractive dip buying opportunity. The development pipeline in the ‘big box’ property market remains extremely weak and internet shopping is tipped to keep growing strongly. This means rental income at Tritax Eurobox should continue marching steadily higher.

Analysts at Statista think the European e-commerce market will expand at a compound annual growth rate (CAGR) of 10.6% between 2023 and 2027. This suggests real estate companies like this could be terrific investments for long-term passive income.

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