Supermarket Income REIT plc (LSE: SUPR) stands out in the real estate sector, specialising in grocery properties that form a vital component of the UK’s “feed the nation” infrastructure. As a real estate investment trust, SUPR focuses on omnichannel supermarkets, supporting both online and in-store shopping, a business model that has proven resilient amidst evolving consumer habits.
With a market capitalisation of $988.18 million, Supermarket Income REIT is a significant player in the retail real estate sector. The company’s portfolio is characterised by long-dated, secure, inflation-linked leases with some of the leading supermarket operators across the UK and Europe. This strategic focus not only ensures a steady revenue stream but also secures the company’s position in a sector known for its stability and growth potential.
Currently trading at 77.9 GBp, the stock has experienced modest movement with a slight dip of 0.40 GBp, representing a 0.01% decrease. Over the past 52 weeks, the stock has ranged between 65.50 and 86.80 GBp, suggesting a relatively stable share price range for investors.
A point of interest for investors is the dividend yield of 7.82%, which is particularly appealing in today’s low-interest-rate environment. However, the payout ratio stands at a concerning 108.48%, indicating that the company is paying out more in dividends than its earnings permit. This raises questions about the sustainability of such generous dividends in the long term, a crucial consideration for income-focused investors.
The company’s revenue growth at a robust 10% is a positive signal, although the lack of net income data and a negative free cash flow of -£14,759,625 indicates potential areas of concern that warrant further scrutiny. The EPS of 0.06 and a return on equity of 6.21% reflect modest profitability.
Despite these financial metrics, analyst sentiment leans towards caution. With two buy ratings and four hold ratings, the market consensus suggests a hold strategy for now. The average target price of 81.60 GBp points to a potential upside of 4.75%, signalling limited short-term growth expectations.
Technical indicators paint a mixed picture. The stock’s 50-day moving average is 80.32, slightly above the current price, while the 200-day moving average is 75.86, indicating mild upward momentum over the longer term. With an RSI of 52.50, SUPR is neither overbought nor oversold, suggesting a balanced market sentiment. Meanwhile, the MACD of -0.54 and a signal line of -0.58 highlight a bearish trend that investors should keep an eye on.
Supermarket Income REIT’s strategy of investing in essential grocery properties provides a defensive investment opportunity, particularly attractive in volatile markets. Its secondary listing on the JSE Limited in South Africa offers additional exposure and potential investment interest from international investors.
Atrato Capital Limited, serving as the investment adviser, brings expertise and strategic oversight, enhancing the company’s ability to capitalise on its niche market position. Investors eyeing SUPR should weigh the alluring dividend yield against the backdrop of its financial health and market conditions, balancing the appealing income opportunity with the risks associated with its current payout levels.
