Supermarket Income REIT (LSE: SUPR) is drawing attention from income-seeking investors as one of the most generous dividend payers currently listed on the London stock market.
The UK stock market is home to some of the most generous dividend shares on the planet, making it remarkably easy to unlock a chunky second income almost overnight.
While the FTSE 100 as a whole only yields around 3% today, looking beyond index funds opens up a world of considerably higher-paying opportunities.
Supermarket Income REIT currently yields 7.18%, enough to turn a brand new £20,000 ISA into roughly £1,436 of instant passive income.
The business model is straightforward: the company buys supermarket buildings and leases them back to major grocery chains like Tesco and Sainsbury’s on long-term contracts.
That recurring rental income funds a dividend that has been raised every year for eight consecutive years, building a track record that few commercial landlords can rival.
Since supermarkets rarely close their doors even during tough economic times, this commercial landlord enjoys an unusually dependable stream of rental cash flow even when economic slowdowns come knocking.
However, experienced investors know that a high dividend yield is often a warning sign of potentially significant risks, and the group’s latest results present a mixed picture.
On the positive side, the portfolio’s value jumped 20% to £2bn, occupancy sits at a perfect 100%, and management raised its minimum dividend growth target to 2% a year from 2027 onwards.
CEO Rob Abraham’s team also cut overhead costs by 32% after internalising management, with those savings already helping to offset rising interest expenses on the group’s debt.
Net rental income actually fell by 2% to £57m in the second half of 2025, with timing gaps around proceeds from various joint ventures appearing to be the primary cause.
That decline has dragged the dividend coverage ratio down to just 0.88, meaning the business is seemingly paying out more in dividends than it is currently bringing in.
The coverage issue does not stem from a weakened rental income stream but rather from a debt-heavy balance sheet that has become notably more expensive to service given higher interest rates in recent years.
Last month, the company successfully refinanced £445m of its outstanding loans, unlocking notable savings in the process and signalling management’s intent to address the balance sheet burden.
So long as the REIT’s recent acquisitions live up to performance expectations and cash flows keep growing, interest expenses are on track to fall while dividend coverage recovers to a healthier level.
That outcome is not guaranteed, which explains why the yield remains so elevated, but investors comfortable with higher risk may find Supermarket Income REIT worthy of closer attention.