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Bang On Target - (SUPR)
4/10/2017 (119264)

Bang on Target

Spot on, Supermarket Income REIT (SUPR) has delivered the maiden trading update and first quarterly dividend of 1.375p, doing exactly what was promised and demonstrating that it ought to make the ideal investment for those seeking decent income with a high degree of security and some modest capital growth aspirations.

Recommended here on August 15 (Income and Growth) with the price at 98p to 99.25p, it weakened a touch before recovering to the current 98.5p to 100p quote. The plan is to deliver an income of 5.5p a share, so the prospective yield if a full 5.5%.

Anyone buying this afternoon will get the interim dividend, while those waiting until Thursday will see the shares ex dividend, and the price will be marked down by the 1.375p payment.

The investment case remains very much intact, enhanced by the speed with which the board has set about doing what was promised – building a portfolio of high quality assets with income rising at least with inflation via periodic upwards rent reviews, plus the longer term possibility of higher returns linked to improving the assets on the sites by further development and such.

The management team has ample experience of dealing with top supermarket groups, and has already spent more than £150m buying three properties, two from Tesco and one from Sainsburys. More will follow. There is also additional gearing coming in via a £10mm credit facility with HSBC at 160 points over three month LIBOR, which means current cost is 2.2% a year.

So far, so good. If you are worried about the market – there is reason, certainly, to be cautious – this offers a decent alternative to cash for some portion of your portfolio (along with our perennial favourite Primary Health Properties (PHP). It is possible to deal in a reasonable tranche of stock, though it would be wrong to expect fireworks. Sensible stuff for uncertain times.

MW note. I have a holding in Primary Health Properties.

Ends


  More on (SUPR)
Previous Stories
Mike on (SUPR)
26/10/2017 A decent income opportunity.
4/10/2017 Solid supermarket returns.
15/8/2017 A solid income and growth play.


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