Here’s one REIT that’s currently paying an amazing 7.3%. Could this last? Let’s see.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

What does it do?

Supermarket Income REIT (LSE:SUPR) owns a £2bn portfolio of grocery stores, which it rents to blue-chip tenants.

From a financial perspective, its operations are easy to understand. It has one source of income, few overheads — despite having a market cap of £1.1bn, it employs less than 20 people – and relatively large borrowings.

As long as it successfully manages the ratio of rents to loan repayments, it should have some cash left over to return to shareholders.

Indeed, because a large proportion of its tenancies provide for inflation-linked rent increases (82%) and the cost of a significant amount of its debt is fixed or hedged (92%), it’s been able to steadily raise its dividend since listing in 2017.

The REIT paid its first dividend in October 2017. Since then, it’s returned a total of 51.65p a share. This is equal to just over half of its IPO price of 100p.

But this highlights a potential issue. The group’s share price is now (14 June) 85p. Shareholders have done well from the trust’s dividends but the loss of capital has, no doubt, been painful.

What’s the problem?

I suspect much of this loss of investor confidence relates to the higher interest rate environment that we’ve experienced since the pandemic.

In common with most REITs, Supermarket Income uses debt to help finance the purchase of its properties. Higher borrowing costs are bad for its bottom line.

At 31 March, its net debt was 8.2 times its EBITDA (earnings before interest, tax, depreciation, and amortisation) compared to a ratio of 5.1 nine months earlier. The trust expects it to be within a range of 7-8 times by March 2027.

Importantly, the REIT currently has a loan-to-value ratio of 43%, which is comfortably below the 60% limit specified by its debt covenants.

Higher interest rates also mean that investors with some spare cash may see an opportunity to earn a better return elsewhere, such as through less risky government bonds or deposit accounts.  

My view

But I remain a fan of the REIT, particularly its dividend.

Based on amounts paid over the past 12 months, a £10,000 investment (11,765 shares) could produce £730 in dividends during the year ahead. Of course, there can never be any guarantees when it comes to payouts.

However, there are a number of factors that suggest it could be increased in coming years.

Positively, the average unexpired term of its rental agreements is 12 years. It enjoys a 100% occupancy rate and a 100% rent collection record. It also claims to have the second-lowest cost-to-income ratio of the FTSE 350’s REITs.

For those wanting to boost their passive income, I think Supermarket Income REIT is well worth considering. In fact, I have it in my own portfolio. But I’m not expecting its share price to go gangbusters. Investors wanting something a bit more exciting should probably look elsewhere.

Should you invest £5,000 in Supermarket Income REIT Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Supermarket Income REIT Plc made the list?

James Beard owns shares in Supermarket Income REIT.

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They can be thought of as a ‘thank you’ for investing.

But let’s assume someone wants to retire at 55 and live off dividends equivalent to half the UK’s average (median) salary. Is it really possible to target an annual passive income of £16,455, equivalent to £1,370 a month? I think so.

Let me explain.

The biggest and best

Some of the most reliable dividend payers can be found on the FTSE 100. But there are significant variations. The yield on the index as a whole is 3.1%. However, there are currently (7 June), 13 paying 5% or more. In fact, eight are returning at least 6%.

With a portfolio of dividend shares yielding 5%, a Stocks and Shares ISA of £329,100 is going to be needed to produce an income of £16,455 a year. At 6%, this drops to £274,250.

But how could someone go about building an ISA worth this much? Let’s see.

Some numbers

During the 20 years to April, the FTSE 100 generated an average annual return of 6.4%. This assumes dividends were reinvested buying more shares.

An individual who invested £5,000 a year and achieved a growth rate of 6.4%, would build a Stocks and Shares ISA of £308,863 after 25 years. To achieve our target annual income of £16,455, a portfolio of dividend shares paying 5.3% would be needed.

We’ve seen there are plenty of FTSE 100 stocks offering attractive yields at the moment but there are many more elsewhere on the UK stock market. In fact, there are 127 on the FTSE All-Share index yielding 5.3%+.

It pays to shop around

One I have in my ISA is Supermarket Income REIT (LSE:SUPR). It owns a £2.1bn portfolio of large grocery stores in the UK and France which it lets to blue-chip tenants on long-term leases.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

It’s currently offering a yield of 7.5%. Owning £308,863 of its shares would generate dividends of £23,165 a year. However, as attractive as this might sound, it’s important to hold a diversified portfolio of shares.

That’s because dividends are likely to fluctuate in line with earnings. This potential volatility means payouts never come with any guarantees. Indeed, Supermarket Income’s profit could come under threat if interest rates remain higher for longer – it had £980m of borrowings at 31 March – and if it struggled to lease one or more of its properties.

A good track record

However, since listing in July 2017, Supermarket Income REIT has increased its dividend every year:

• FY18 – 5.50p
• FY19 – 5.63p
• FY20 – 5.80p
• FY21 – 5.86p
• FY22 – 5.94p
• FY23 – 6.00p
• FY24 – 6.06p
• FY25 – 6.12p
• FY26 – 6.18p (current target)

Also, it’s never had a bad debt and it currently enjoys a 100% occupancy rate. Crucially, I believe grocery stores are here to stay. Whether people shop in-store or online, large supermarkets remain an essential part of the sector’s business model.

For these reasons, I believe Supermarket Income REIT’s an excellent dividend share to consider for those wanting to boost their passive income.

Should you invest £5,000 in Supermarket Income REIT Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Supermarket Income REIT Plc made the list?

James Beard owns shares in Supermarket Income REIT.

The post How much is needed in a Stocks and Shares ISA to target a £1,370 monthly passive income? appeared first on The Twelfth Magpie.

The FTSE 100‘s still packed with market-leading businesses that have strong balance sheets and diversified revenue streams. These are critical qualities for any quality dividend-paying share. But rapid share price gains mean the dividend yields on many of these top shares have crumbled.

Today, the number of FTSE 250 stocks offering forward dividend yields above 7% is 41. That’s more than five times the number currently listed on the FTSE 100. Not all of these are rock-solid buys for passive income, either in the near term or beyond. But a large number are, sharing the same enviable qualities as many high-yielding Footsie shares.

So which ones are worth serious consideration?

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

7%+ dividend yields!

Unite Group (LSE:UTG) and Supermarket Income REIT (LSE:SUPR) are two top shares I don’t yet own but have caught my eye. At current share prices, their forward dividend yields sit at 7.7% and 7.8% respectively.

The result? A £20,000 lump sum invested across them today could generate total dividends of £1,550 over the next 12 months.

Unite’s the largest provider of student accommodation in the UK. Its portfolio comprises 142 different properties across 22 cities, providing a steady stream of income it can pay out in dividends. Its share price has collapsed 12% in 2026, as tough economic conditions have seen cash-strapped students prioritise living at home over staying in digs.

The good news? As well as driving the yield close to 8%, Unite shares trade on a forward price-to-earnings (P/E) ratio of 7.5 times. This represents an attractive dip-buying opportunity to think about.

The student accommodation market is under pressure right now, but the long-term outlook remains robust. And Unite has a strong balance sheet to maintain strong dividends in the meantime. This should be helped by the firm’s plans to divest £300m-£400m worth of low-quality assets each year.

Another REIT opportunity?

Like Unite, Supermarket Income REIT is a real estate investment trust. This can carry an additional advantage for passive income seekers as, under sector rules, at least 90% of yearly rental earnings need to be distributed through dividends.

This FTSE 250 share isn’t suffering the same demand issues as Unite. As its name suggests, it rents out properties to leading supermarkets where vacancy and rent collection remains stable over time. It lets out roughly 130 stores in total to the likes of Tesco, Sainsbury’s and Waitrose. And its operations span the UK and France, providing added diversification that helps spread risk.

The downside is that rising interest rates could put rental profits under pressure. But while this could impact Supermarket Income’s share price, I’m not expecting this to impact dividends in the near term. With a price-to-book (P/B) ratio of 0.9, I believe it’s a cheap dividend share to consider.

Should you invest £5,000 in Supermarket Income REIT Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Supermarket Income REIT Plc made the list?

Royston Wild does not hold any positions in the companies mentioned.

The post These cheap FTSE 250 shares could deliver a £1,550 ISA income in just 12 months! appeared first on The Twelfth Magpie.

It’s important, though, to hold a diversified range of dividend stocks to balance risk and deliver a reliable long-term income. But what could a diversified portfolio look like?

I think holding a portfolio of 20+ different shares, investment trusts and exchange-traded funds (ETFs) is a top strategy to consider. It could potentially contain the following three dividend heroes: Greencoat UK Wind, Supermarket Income REIT and Legal & General (LSE:LGEN).

If broker forecasts are accurate, a £20,000 Stocks and Shares ISA investment spread equally among these three companies will deliver a £1,840 second income this year alone. As a results I think all three are worth further research.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Why Legal & General shares?

Legal & General is one of the FTSE 100‘s hottest dividend shares. It’s forward dividend yield is 9.1%, and it’s raised annual payouts every year since 2010 bar one.

What’s its secret? It mainly comes down to three things:

• Enormous scale and diversification across product areas.
• Strong cash generation and high capital reserves.
• Commitment to returning excess capital through share buybacks and dividends.

Legal & General also benefits from a market-leading brand and steady market growth. Amid an ageing global population and rising interest in financial planning, demand for its pensions, investment and other products is heading northwards. I’m optimistic this will continue, even though market competition is growing and with it pressure on sales and margins.

A great REIT

Real estate investment trusts (REITs) can be ideal stocks for targeting a second income. Sector rules state 90% or more of rental earnings each year must be distributed to shareholders.

Supermarket Income’s one trust with a better dividend record than most. Why? It also focuses on the highly stable food retail market, and its supermarket properties are let out to blue-chip operators including FTSE 100 firms Tesco and Sainsbury’s.

The result is consistent dividend growth since it listed on London’s stock market in 2019. For this year, it packs an enormous 7.8% dividend yield. But I’m mindful that future dividend growth could be impacted by interest rate rises denting earnings.

A 10.6% income opportunity?

Greencoat UK Wind is another classic safe-haven dividend stock. As its name implies, it operates in the renewable energy space, where demand for its services remains largely unchanged over time.

There are other advantages too, including inflation-linked contracts and long-term offtake agreements with power suppliers. As a consequence, dividends have risen here for 12 of the last 13 years. It also means a juicy 10.6% dividend yield for 2026.

Like any dividend share, there are risks involved. If wind speeds slow down, the amount of profits Greencoat UK makes could slump as power generation drops. That said, the company’s UK-wide portfolio helps spread this risk, resulting in that excellent dividend growth record.

Should you invest £5,000 in Legal & General Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General Group Plc made the list?

Royston Wild owns shares in Legal & General.

The post These 3 shares could deliver a £1,840 second income in an ISA overnight! appeared first on The Twelfth Magpie.

But how much would be needed to produce more than the UK State Pension which, for those with a full record of contributions, is currently £12,548 a year? Let’s see.

How do the numbers stack up?

The size of the investment pot required will vary with the level of dividends achieved. For example, a portfolio of dividend shares yielding 3% a year would require an ISA worth £418,267 to match the State Pension.

However, I think it’s possible to improve on this.

For example, there are 40 stocks on the FTSE 350 that are presently (31 May) yielding 6% or more.

One of these is Supermarket Income REIT (LSE:SUPR). It’s presently offering a return (no guarantees, of course) of 7.4%. It owns and operates a portfolio of large grocery stores in the UK and France, which it leases to blue-chip tenants under long-term contracts.

To generate £12,548 in dividends each year from this stock alone, £169,568 of the trust’s shares would be needed. Having said that, I’m not advocating owning just one share. I believe a diversified portfolio is important.

A key pillar of our investment strategy is to invest in omnichannel stores. Omnichannel supermarkets provide in-store shopping, but also operate as last mile, online grocery fulfilment centres for both home delivery and click and collect.

Company website

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.

Should we be wary of a high yield?

Admittedly, a return that’s over twice the average of that for the UK stock market as a whole should be treated with caution. It could be a sign that investors are expecting a cut. Alternatively, a yield might be rising due to a falling share price, which could be an indication that there are other issues to worry about.

Indeed, the group’s shares have fallen by nearly a third over the past five years.

My view

However, I see this as more of an opportunity than something to be too concerned about. That’s because I believe some of this apparent loss of investor confidence has been brought about by the post-pandemic higher interest rate environment, rather than anything specific to the trust’s operations.  

Like most real estate income trusts (REITs), Supermarket Income uses debt finance to grow. Higher borrowing costs impact its bottom line and, potentially, reduces the scope for shareholder distributions. Despite current global uncertainty, I think interest rates will come down over the medium term.

Another potential issue is that the commercial property market can be highly cyclical.

But the trust has a solid track record in rising to these challenges. It’s grown its payout every year since listing. And I believe physical stores will continue to be needed for decades to come. As evidence of this, the REIT enjoys a 100% occupancy rate. In addition, it’s never had a bad debt since becoming a listed company.

For these reasons, I have Supermarket Income REIT in my own portfolio. Income investors could consider adding it to their own.

Should you invest £5,000 in Supermarket Income REIT Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Supermarket Income REIT Plc made the list?

James Beard owns shares in Supermarket Income REIT.

The post How much is needed in a Stocks and Shares ISA to beat the UK State Pension of £12,548? appeared first on The Twelfth Magpie.

And right now, with higher interest rates weighing heavily on valuations, some genuinely attractive yields have popped up for long-term investors.

Two that stand out in May are Supermarket Income REIT (LSE:SUPR) and Primary Health Properties (LSE:PHP).

At current yields of 7.52% and 7.67% respectively, every £1,000 invested in Supermarket Income REIT generates £75.20 a year in passive income, while the same amount in Primary Health Properties delivers £76.70.

That’s more than double the rougly 3% payout UK index investors are earning today! So why are these yields so high? And where exactly is the risk?

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.

The investment thesis

Starting with Supermarket Income REIT, this commercial landlord owns a portfolio of large-format supermarket properties, predominantly leased to grocery giants such as Tesco and Sainsbury’s on long-duration rental contracts linked to inflation.

The appeal for income investors is quite intuitive. Supermarkets are among the most essential retail formats in the country, often continuing to trade profitably through even recessions. And with a client list of healthy industry titans, this REIT’s income stream looks exceptionally secure.

What’s more, the business has been quietly diversifying its target market. Several of its properties now double as fulfilment hubs for online grocery orders, increasing their operational value to tenants and paving the way for stickier, longer-lasting relationships.

Primary Health Properties tells an equally compelling story. Over 90% of its rental income is funded directly or indirectly by the NHS, effectively translating into cash flow backed by the British government.

But it also has a bit of a secret weapon. Many of its older leases are currently priced below open market rent levels. This means there’s a material pipeline of future rent uplifts on the horizon or, in other words, the group’s income looks set to grow even without acquiring a single new property.

What’s the catch?

As promising and secure as these cash flows and, in turn, dividends seem, there are some important risks to highlight.

Most notably, each REIT carries significant debt on its balance sheet. And with interest rates still remaining elevated, it’s already translated into notable pressure on margins as well as property valuations. The result has been higher loan-to-value ratios and tighter dividend coverage.

For the time being, shareholder payouts remain relatively secure. But if interest rates start to tick back up due to higher-than-expected inflation, that coverage could get strained.

The bottom line

The macroeconomic risks surrounding the entire REIT sector is tough to ignore. But while some businesses could struggle under increased pressure, there are always exceptions. And finding these exceptions today could result in earning substantial yields in the long term.

In my opinion, both these REITs could be in this winning category. That’s why I’m already investigating both as potential additions to my passive income portfolio.

The post 2 REITs yielding 7%+ to consider for passive income in 2026 appeared first on The Twelfth Magpie.

Risk isn’t just about the possibility of share prices going down. Over the long term, there’s something else to focus on.

What is risk?

Warren Buffett – one of the best investors of all time – defines risk as the chance of permanent loss. That’s a good definition.

Share prices go up and down in ways that cash doesn’t. But that doesn’t necessarily make cash a safer investment.

Inflation is the rate at which money depreciates relative to other things. According to the latest data, it’s at 3.3%.

That means the value of cash is going down. And it doesn’t look like it’s coming back – it looks like a permanent loss.

The only way to avoid this is by finding something that can offer a better return. But that’s not easy with cash savings.

That means the risk – the probability of permanent loss – associated with cash savings is pretty high. But what about stocks?

Stocks and shares

I think several dividend stocks have a great chance of beating inflation over time. The key is to remember what they are.

Stocks and shares represent ownership stakes in businesses. So the question is whether those businesses can grow faster than inflation.

A lot of the time, there’s a very good chance they can. Supermarket Income REIT (LSE:SUPR) is one example. 

The firm owns and leases a portfolio of retail properties. And it returns 90% of its taxable income to shareholders as dividends. 

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.

Importantly, the firm’s contracts typically include inflation-linked increases. So the risk of being left behind is minimal.

How risky is the stock?

Shares in Supermarket Income REIT currently come with a 7.73% dividend yield. Add in inflation protection and it looks pretty attractive.

The share price will almost certainly go up and down. But what investors need to focus on is the underlying business. 

Long leases and high-quality tenants mean income is relatively reliable. There are, however, some risks to consider.

The most obvious is that its tenant base is heavily concentrated. It relies on Tesco and Sainsbury for a lot of its income. This puts the company in a weaker position when it comes to renegotiating. And that’s the main risk for investors.

Despite this, I think the threat of permanent loss in real terms is much higher with cash. That’s why I think the stock is worth checking out.

Risks and rewards

Inflation means the chances of cash losing its value over time are pretty high. In ordinary savings accounts, I think it’s almost guaranteed.

With dividend stocks, the size of a potential loss is much higher. But the probability is much lower – at least, in some cases.

Investors need to weigh up which one is more important. And a lot depends on the context at hand. When it comes to things like paying your electricity bill or fixing your car, there’s no substitute for cash. It’s as simple as that.

For earning long-term passive income, however, I think it’s a different matter. In that situation, I think dividend stocks are the way to go.

The post Are dividend stocks actually riskier than cash savings? appeared first on The Twelfth Magpie.

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.

Here I’d like to talk about three top trusts in particular: Tritax Big Box (LSE:BBOX), Social Housing REIT (LSE:SOHO) and Supermarket Income REIT (LSE:SUPR). With forward dividend yields of 5.6% and above, they certainly offer better dividend potential in the near term than most FTSE 100 shares.

Read on to discover why they’re top stocks to consider.

Top trio

Each of these shares enjoys unique advantages that make them ideal for long-term passive income. For Tritax Big Box, these include:

• A diversified portfolio of almost 700 assets.
• Exposure to long-term growth markets like e-commerce.
• A high-quality tenant base like Amazon, Tesco and Iron Mountain.
• Low debts (its loan-to-value sits below 33%).

Social Housing REIT has various qualities of its own, including:

• A focus on the ultra-defensive specialised supported social housing (SSH) market.
• Low property vacancy risks due to housing demand exceeding supply.
• Its tenants are housing associations or councils, meaning rents are underpinned by social care budgets.
• 100% of its contracts are inflation linked.

Food for thought

Meanwhile, Supermarket Income REIT benefits from:

• Its commitment to the largely recession-proof food retail sector.
• A string of blue-chip supermarkets including Tesco, Sainsbury’s, Waitrose and Aldi on its books.
• A portfolio that includes omnichannel stores, reducing the risk from online grocery.
• Exposure to a structural growth market as the UK population rapidly increases.

So how do these qualities translate into dividend forecasts for these REITs’ current financial years? Let’s take a look:

As you can see, yields are least almost double the current FTSE 100 average of 3%. Social Housing has never cut its annual dividends either, while Supermarket Income has raised them every year since it listed on London’s stock market in 2019.

So what next?

However, past performance isn’t a guarantee of future returns. And dividends at each of these REITs could be impacted by rising interest rates that drive up borrowing costs.

These businesses could also run into more specific problems. A recession might cause occupancy to fall at some of Tritax’s logistics sites. Changes to supported housing funding could impact Social Housing REIT’s earnings and dividends. And Supermarket Income could suffer if online grocery shopping accelerates.

However, any passive income share an investor buys comes with risk. And on balance, I think these REITs have the tools to keep delivering market-beating dividends over the long term.

The post How do these REITs keep paying spectacular dividends? appeared first on The Twelfth Magpie.

Want to see how a £20,000 ISA could generate a ton of income? Here’s a simple example.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Building a passive income portfolio

I’ve listed five high-yield stocks from the UK’s FTSE 350 index and their dividend yields. They come from a range of sectors – two financial services companies, two REITs, and a consumer goods business.

• Primary Health Properties – 7.8%.
• Supermarket Income REIT (LSE: SUPR) – 7.5%.
• Aviva – 6.7%.
• Domino’s Pizza – 5.5%.
• M&G – 7.3%.

Now, the average forward-looking dividend yield of those stocks is about 7%. That means if an investor was to split £20,000 across those five names, they could be in line to pocket income of around £1,400.

What’s the catch?

It’s worth pointing out dividends are never guaranteed. And the yield figures I’ve used above are based on forecasts (which aren’t always accurate). It’s also worth mentioning that every stock has risks. So investing money in just five stocks isn’t very sensible.

But the calculation shows what’s possible with an ISA and a selection of dividend stocks. It really isn’t hard to build a decent second income.

Is this 7.5% yield worth a look?

Now, I think all of the stocks above are worth a look today. I haven’t selected them randomly. One I feel is particularly worth highlighting is Supermarket Income REIT. It’s a commercial property company that’s focused on grocery store real estate across the UK and Europe and counts the likes of Tesco, Sainsbury’s, Asda, and Aldi among its tenants.

Looking beyond the attractive yield here, there are quite a few things to like about this stock. For a start, it’s defensive in nature. No matter what happens in the economy in the years ahead, supermarkets are likely to continue operating. When times are tough, people can cut out a lot of discretionary expenses but they can’t cut out food.

Supermarkets also look immune to AI disruption. That’s another plus from an investment perspective. Additionally, the company has blue-chip tenants. These companies are unlikely to suddenly stop paying rent.

Finally, it has a 100% occupancy, an average unexpired lease term of 12 years, and a large proportion of its income is inflation linked. So operationally, it looks pretty robust.

That said, there are risks here. One is debt – at the end of December the company had net debt of £925m. Servicing this debt could put pressure on earnings, especially if interest rates remain high. This, in turn, could impact dividends.

Overall though, I see a lot of appeal in this name from a dividend investing/passive income perspective. I believe it’s worth a closer look.

The post Here’s how a small dividend stock ISA could produce £1,400 in passive income a year appeared first on The Twelfth Magpie.

What’s more, it doesn’t take a huge amount of money to get the ball rolling. A few hundred pounds is all that’s needed. But someone with a £5,000 lump sum has a lot of flexibility. And with the right stocks, it’s enough to unlock upwards of £350+ passive income overnight with a 7%+ yield.

So how can I do this?

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Earning a 7%+ yield

Right now, there are just shy of 30 companies in the FTSE 350 offering a payout of at least 7%. Some dividend stocks even venture into double-digit territory.

However, it’s important to remember that the higher the yield, the higher the risk… in most cases. It’s the job of an investor to dig deeper, understand the risk and decide whether or not it’s worth taking. And right now, there are definitely some UK shares that the market seems to be underestimating.

One such stock might be Supermarket Income REIT (LSE:SUPR). With a 7.41% dividend yield on the table, if I invest £5,000 today, I’d instantly unlock a £370.50 annual passive income. So is this a buying opportunity? Or is it a trap?

Impressive fundamentals

As the name suggests, Supermarket Income REIT is a commercial real estate landlord that leases properties to supermarkets across the UK and France.

By exclusively dealing with retail giants such as Tesco and Waitrose, the company has had no issues when it comes to rent collection. And as of 2026, all of its properties are currently occupied, generating recurring and reliable rent.

Moreover, the average duration of its leases currently spans 12 years, with 82% including inflation-linked uplifts. This has translated into exceptional cash flow visibility. And it’s how the firm’s been able to continuously hike dividends since its IPO in 2017.

So what’s the catch?

The most immediate issue is debt. Building a real estate empire isn’t cheap. And the company has been borrowing money to help cover the cost. That isn’t unusual, and the generated cash flows are more than sufficient to cover the interest payments.

Until recently, the group had £443.4m of debt maturing before July 2027. In March, this problem was partially resolved by raising capital through a bank loan secured against its joint venture property portfolio with Blue Owl Capital. Essentially, the company borrowed long-term debt to cover short-term maturities.

This has certainly helped reduce near-term refinancing risk. But it’s effectively delaying the problem rather than solving it. And at an interest rate of 5.24%, this new debt isn’t cheap, applying pressure to excess cash flows used to fund dividends.

The bottom line

With new properties recently being acquired, management projects a nice boost to its rental cash flows, helping both improve dividend and interest coverage.

There’s no denying the elevated short-term refinancing risk surrounding this business. But if the company’s successful in restructuring its debt load and continues to collect rent on time and in full, patient investors with a long-time horizon may want to take a closer look at Supermarket Income REIT and its dividend yield.

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