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I think he FTSE 250 It’s a great place to look for stocks to buy. Some of the companies it contains are not as well known as their FTSE 100 their counterparts, but that just means there’s a better chance of finding a bargain.
Earlier this week I bought 238 shares of a real estate investment trust (REIT) listed on the FTSE 250. I think the market is missing a really good opportunity and I’m happy to try and take advantage of it.
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The action
the action is Supermarket Income REIT (LSE:SUPR). I’ve been looking at this business for a while and the more I see, the more impressed I am.
As the name suggests, the company makes money by renting commercial spaces to supermarkets. It has a portfolio of 55 properties, with a total estimated value of £1.73bn spread across the UK.
There are a limited number of supermarket operators in the UK, meaning the company has a small concentration risk with its tenant base. Among them, tesco and Sainsbury’s They represent just over 75% of the total rent.
However, I think this is a limited risk. Having much of your rent coming from good tenants (Supermarket Income REIT collected 100% of the rent owed on its fully occupied portfolio last year) is not a bad thing in my opinion.
Disposals
I also really like the sector in which the company is positioned. In terms of operators, the food sector sees Tesco and Sainsbury’s trying to compete with discount retailers such as Aldi and Lidl.
To do this, supermarkets are trying to acquire their own buildings. That allows them to avoid rental costs and pass savings on to customers in the form of lower prices.
This means Supermarket Income REIT could have another opportunity available. With motivated buyers, the company could benefit by being able to sell units at favorable prices to retailers who want to own their outlets.
However, the company is also not under pressure to sell any of its buildings in the near future. Since the average lease still has 13 years left, the company can sit back and collect rent for some time simply by maintaining its current portfolio.
A stock I’m buying
I view Supermarket Income REIT as a stock that has an attractive dividend at current prices and can provide lasting passive income in the future. Despite this, the stock has fallen 26% in the last 12 months.
As a result, the dividend yield has risen to over 7.5%, which I consider too good to ignore.
I hope to continue shopping from here. Stabilizing interest rates could help the stock price recover, but as long as the price stays near its current levels, I’m looking to buy more.
