For me, investing for passive revenue is all about boring reliability. The extra boring and dependable it’s, the extra I’m .

I reckon the corporate I’m writing about as we speak, Grocery store Revenue REIT (LSE: SUPR), might be a very good instance.

I purchased shares on this property agency earlier this yr and anticipate them to supply me with a few years of dependable money payouts.

Tremendous-reliable revenue?

Grocery store Revenue is an actual property funding belief (REIT) that owns grocery store properties.

The corporate’s focus is on massive, high-quality shops — 75% of its rental revenue comes from Tesco and J Sainsbury.

Tenants like these FTSE 100 retailers are unlikely to default on their lease and can signal lengthy leases to lock in profitable shops. Grocery store Revenue’s common unexpired lease size was 12 years on the finish of June 2024.

These sights are mirrored within the firm’s report of 100% occupancy and 100% lease assortment since its IPO in 2017.

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Why have SUPR shares been falling?

The worth of economic property is usually linked to rates of interest.

Increased pursuits typically trigger industrial property costs to fall because of increased financing prices. This is among the important causes for Grocery store Revenue’s 40% share price decline since summer time 2022.

The share price chart seems to be worrying, however on stability I feel the inventory’s valuation as we speak is far more enticing than it was two years in the past.

Patrons can now decide up shares at a reduction of greater than 15% to the June 2024 internet asset worth of 87p per share. That’s a helpful margin of security in case market circumstances stay troublesome.

There’s additionally the dividend yield. Right this moment’s 8.5% dividend yield is far more interesting to me than the sub-5% yield on provide in June 2022.

Rate of interest uncertainty

To be clear, increased rates of interest do create some danger. Grocery store Revenue had internet debt of £655.5m on the finish of June, representing a 37% loan-to-value ratio.

If increased rates of interest make it dearer to refinance this debt, then dividend funds may get squeezed. I can’t utterly rule out the danger of a dividend lower, which might in all probability set off additional share price falls.

Nevertheless, my analysis means that Grocery store Revenue’s dividend ought to keep protected, so long as rates of interest don’t rise additional.

Fortuitously, most traders anticipate rates of interest to fall over the following yr. If this occurs, the corporate says decrease charges ought to assist to assist “earnings and dividend growth over the long term”.

One additional piece of excellent information for me is latest insider shopping for. The 2 principals of Grocery store Revenue’s funding group every spent £200k on shares in September. I’d wish to suppose this displays a optimistic view on the outlook for the REIT.

Shopping for for passive revenue

Dealer forecasts recommend Grocery store Revenue pays a dividend of 6.12p per share for 2024.

To generate a £150 month-to-month passive revenue, I’d want to purchase 29,142 shares. That may price round £20,750, based mostly on the 71p share price on the time of writing.

Along with the dividend revenue from these shares, I’d hope to get pleasure from some capital positive aspects over time.

General, I feel this property inventory seems to be a good alternative in the intervening time for my revenue portfolio.