Supermarket Income REIT 

(SUPR) 76p

Gain to date: 0%

We suggested investing in the company in late March on the basis income was rising due to strong sales at supermarkets and the shares were yielding 8% with the dividend fully covered by earnings.

While zero returns isn’t quite what we’d hoped for, in the meantime investors have received two interim payments of 1.515p per share, one in mid-May and one in mid-August, so they have literally been paid to own the stock.

WHAT HAS HAPPENED SINCE WE SAID BUY?

The beauty of owning a company which owns multi-channel stores and sites operated by Sainsburys (SBRY) and Tesco (TSCO) is you know there is no question over occupancy or rent collection, which continues to be 100% in both cases.

The company has generated a 12% increase in annualised passing rent thanks to a 4% like-for-like rental uplift and accretive acquisitions during the 12 months to June.

The big two supermarket groups are actively investing in their sites to capture a greater share of the grocery market, and a recent visit to Sainsbury’s Cobham store had analysts salivating over its plans to rejuvenate 100 of its stores to drive greater sales, all at its own cost.

Meanwhile, the trust’s managers have been expanding the portfolio, adding multi-channel sites in France operated by food giant Carrefour (CA:EPA), which aims to treble online sales to €10 billion by 2026, at a very attractive net initial yield.

WHAT SHOULD INVESTORS DO NOW?

We believe Supermarket Income REIT will reward patient investors, although while an 8% yield is nice we do also expect the share price to get a shimmy on as we approach retail’s ‘golden quarter’.

Commercial property valuations should rise as interest rates fall, which will give added support to the stock price, and we can even see the case for the discount to NAV (net asset value) narrowing which would be a bonus. 

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