With the UK inventory market turning crimson in the meanwhile, loads of buyers are actual property funding trusts (REIT) for sanctuary. However are they actually the ‘secure haven’ that some consider them to be? Or is it a case of purchaser beware?
Let’s take into account either side of the argument by one specific high-yielding instance that at this time (11 March) has launched its outcomes for the six months ended 31 December 2025.
Bricks and mortar
Grocery store Earnings REIT (LSE:SUPR), which owns a portfolio of freehold and leasehold grocery shops within the UK and France valued at £2.06bn, has paid dividends of 6.15p a share over the previous 12 months. With a present share value of 82.1p, it means the inventory’s yielding an unimaginable 7.5%.
However issues get higher. Its payout’s been elevated yearly because it listed in July 2017. This spectacular file is partly as a result of the truth that — in frequent with all REITs — it has to return not less than 90% of its rental revenue to shareholders annually by the use of dividends.
Nonetheless, the belief nonetheless needs to be worthwhile for it to be able to reward shareholders. In any case, 90% of nothing is nil.
Importantly, the belief’s in a position to goal paying a progressive dividend as a result of its revenue is secured through long-term inflation-linked leases. And due to the calibre of its tenants – Tesco and Sainsbury’s to call simply two – it has full occupancy and no dangerous money owed.
Please be aware that tax remedy depends upon the person circumstances of every shopper and could also be topic to vary in future. The content material on this article is offered for data functions solely. It’s not meant to be, neither does it represent, any type of tax recommendation.
Adapt and survive
I significantly like Grocery store Earnings as a result of giant supermarkets have advanced over time to change into the hub of the grocery market. With extra individuals purchasing on-line, many began to consider that the trade would transition in direction of centralised distribution centres. Nonetheless, giant grocers have efficiently tailored to this problem.
Whether or not somebody desires to go to a retailer, have their groceries delivered, or go and gather what they’ve purchased on-line, the omnichannel grocery store stays important. I don’t assume it’s a coincidence that Ocado Group’s now planning to shut a few of its buyer fulfilment centres.
In my view, these qualities make Grocery store Earnings a fantastic defensive inventory. Each the REIT enterprise mannequin — and the grocery sector — could be enticing throughout instances of market volatility. That’s why I’ve shares within the REIT and why I feel others might take into account including some to their very own portfolios.
No regrets
Nonetheless, some are cautious of REITs as a result of they, usually talking, are inclined to have giant borrowings. That’s as a result of most use debt to increase. At 31 December 2025, Grocery store Earnings’s stability sheet disclosed borrowings of £980m. This provides it a loan-to-value (LTV) of 43%, considering some 2026 transactions. Larger rates of interest will result in elevated borrowing prices and decreased earnings.
Others buyers don’t just like the cyclical nature of the industrial property market, significantly within the UK. If grocery store actual property values have been to fall, the belief’s web asset worth would tumble and its LTV rise. This might restrict its future borrowing capability.
However I nonetheless fee Grocery store Earnings. In comparison with the identical interval a 12 months in the past, its newest outcomes present an 11% improve in rental revenue and a 0.1% enchancment in portfolio yield. The group’s focusing on a 2% improve in its annual dividend from its subsequent monetary 12 months onwards. That’s why I’m pleased with my selection of REIT.
