Picture supply: Getty Photographs
Even with UK shares producing phenomenal returns in 2025, there are nonetheless loads of low cost actual property funding trusts (REITs) providing beneficiant dividend yields in 2026. And amongst these companies stands Grocery store Earnings REIT (LSE:SUPR) with a payout of seven.3%.
Meaning for each £100, buyers can earn roughly £7.30 in annual passive earnings. And at its present share worth, buyers can snap up 595 shares, producing an earnings of £36.60 in a single day.
So is that this a screaming purchase for earnings buyers?
Please be aware that tax therapy will depend on the person circumstances of every consumer and could also be topic to alter in future. The content material on this article is supplied for info functions solely. It isn’t supposed to be, neither does it represent, any type of tax recommendation.
The bull case
As its identify suggests, Grocery store Earnings REIT owns and manages a portfolio of grocery store and grocery properties which can be leased out to a number of the largest retailers throughout the UK and Europe.
Since leases are locked in for many years slightly than a handful of years, administration enjoys vital long-term income transparency. And by implementing annual contractual uplifts, the group’s in a position to generate a predictable and inflation-resistant earnings stream that’s paved the way in which for seven consecutive years of payout hikes.
For sure, that’s undoubtedly an encouraging trait for earnings buyers. And with administration utilizing its monetary power and money flows to fund additional property acquisitions, the enterprise is steadily increasing its business actual property empire.
So is that this a no brainer?
The bear case
The corporate’s steadiness sheet stays in good condition. Its loan-to-value ratio does sit at 31%, however the money circulate protection of its curiosity obligations stays a really wholesome 3.8 instances. And administration is utilizing this power to borrow more cash as a funding mechanism for its property acquisition pipeline.
Nonetheless, there are nonetheless two major challenges. The primary is that administration faces a collection of debt maturities over the approaching years which may require refinancing or asset disposals to cowl. The second is that with grocery retail revenue margins getting squeezed by greater labour prices and inflation, lease affordability threat’s on the rise.
With this enterprise solely usually coping with business titans equivalent to Tesco, the chance of late rental funds appears low. However lease progress may stall as tenants renegotiate slower uplifts when leases are up for renewal. And will have a major affect on this REIT’s long-term money flows.
What’s the decision?
its newest outcomes, with money flows wolfed up by curiosity on excellent loans, dividend protection is exceptionally tight. In reality, it stands at 0.98 instances as of June 2025. In different phrases, the corporate has begun paying out extra to shareholders than it’s bringing in, albeit by a small quantity.
Over the quick time period, that’s not essentially an issue if money flows later rebound. However in the long term, with out enchancment, it’s unsustainable. And it does doubtlessly put this inventory’s tasty 7.3% yield in danger.
Is it a threat price contemplating? For some earnings buyers in search of defensive dividends, it is perhaps. However there are different REITs on the market with comparable ranges of payout which have a lot stronger dividend protection. With that in thoughts, I believe these different shares are extra tempting for my passive earnings portfolio as we speak.
