Supermarket Income REIT PLC (LSE:SUPR, OTC:SUPIF) has one of the strongest rental income profiles in the UK real estate investment trust sector, according to a report by Stifel.
Nearly 80% of its leases are index-linked, ensuring a stable and predictable income stream. Despite this robust profile, the American investment bank believes the equity market undervalues the company and reiterates a 'buy' rating with a price target of 100p (current price 75p).
The company, which specialises in investing in UK supermarket assets, recently made its first foray into Europe, acquiring a portfolio of 17 omnichannel Carrefour stores.
This expansion, coupled with the recent unwinding of a joint venture with Sainsbury's, has provided Supermarket Income REIT with significant investment potential. Stifel expects further acquisitions in both the UK and Europe over the next year.
The REIT's shares offer a prospective dividend yield of 8%, which is well above the UK REIT average of 4.4%.
This dividend is fully covered by earnings, reinforcing the company's financial stability. Despite a 12% fall in share price since the beginning of the year, Stifel argues that this decline is unjustified, especially considering the recovery of the EPRA UK Index over the same period.
Supermarket Income REIT, managed externally by Atrato Capital, leases most of its properties to major UK supermarket operators.
The portfolio's high degree of index-linked leases and long-duration contracts, typically exceeding 15 years, provide strong income security. With future acquisitions planned in both the UK and Europe, the company aims to capitalize on its solid rental income profile and strategic growth opportunities.