A 7.6% yield? Here’s the dividend forecast for a reliable FTSE 250 trust
When searching for dividend stocks, it’s important to strike a balance between a juicy yield and the sustainability of income payments. It can be difficult to match the two, as a very high dividend yield can be due to a falling share price. However, some options have a generous dividend forecast while still having a strong track record of payments. Here’s one for consideration.
The company in focus
I’m talking about the Supermarket Income REIT (LSE:SUPR). As the name suggests, it’s a real estate investment trust (REIT) based in the UK that focuses on investing in supermarket properties.
Over the past year, the stock has increased an impressive 16%, with a current dividend yield of 7.24%. The fact that the stock is up and the yield is still high is a strong sign. If the dividend per share stays the same and the stock rises, this reduces the yield. It’s true that the yield has fallen modestly in recent months, but income investors will point out that in recent years, the dividend per share has been hiked.
It’s an attractive dividend option because it has a relatively stable cash flow. It makes money from rental income from leasing the supermarket buildings to tenants. These are usually large chains, so the risk of default is quite low. In theory, over time, the company can also benefit from property value appreciation.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
Dividend details
Typically, the REIT pays out quarterly dividends. Over the past year, this has totalled 6.11p. Looking ahead, the dividend is forecast to increase to 6.26p for the full year 2026, with it potentially rising to 6.36p in 2027. If I assume the share price stays the same, this would equate to a yield of 7.6% in 2027.
Some might look at the forecast and not be overly impressed. After all, it’s only a modest increase from the current yield. Yet a few points need to be remembered. The share price projection is just a forecast. The actual share price in the future might be higher or lower than right now, which could increase or decrease the future yield.
Another factor is the reliability. The REIT has a strong track record in recent years of paying out quarterly dividends. Based on the latest results and dividend cover, I don’t see this changing. Of course, nothing is guaranteed, but to be able to potentially achieve a yield in excess of 7% with relatively low risk of dividend cuts is quite appealing.
One concern is that the property values could fall due to weaker sentiment or other market conditions. Given that the share price should closely track the net asset value of the portfolio, this is a risk.
Overall, I think the stock offers a generous yield with a sustainable forecast, so could be something for investors to consider.
The post A 7.6% yield? Here’s the dividend forecast for a reliable FTSE 250 trust appeared first on The Motley Fool UK.
Like buying £1 for 31p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
More reading
- This FTSE hidden gem now has a stunning 7.4% yield!
- How to turn £100,000 into an instant £7,450 second income
- 2 mega-cheap dividend shares to consider this summer, 1 with a 12.7% yield!
- I’ve just bought this 7.5%-yielding REIT to give me a second income
Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
