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I’ve been looking for stocks in the FTSE 100 and FTSE 250 indexes that shouldn’t be affected by AI disruption. And I reckon I’ve found a great one.
This stock operates in an industry that isn’t going away any time soon. And with a 7% dividend yield on offer, and a rapidly rising share price, I think it’s worth a closer look today.
Under-the-radar supermarket company
The stock I want to highlight is Supermarket Income REIT (LSE: SUPR). It’s a real estate investment trust (REIT) that invests in grocery store property across the UK and Europe.
It rents out this property to blue-chip supermarket companies such as Tesco, Sainsbury’s, Waitrose, Asda, Aldi, Marks & Spencer, and Carrefour on a long-term basis. Overall, it has around 80 properties (worth approximately £1.6bn) in its portfolio.
At present, shares in this REIT are trading for 86p. That means a £1,000 investment buys around 1,162 shares (ignoring trading commissions).
The stock may not trade at these levels for much longer though. Right now, it’s in a strong uptrend – it’s up about 6% year to date and 20% over the last 12 months.
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Four reasons to be bullish
In my view, there’s a lot to like about this stock right now. Let’s start with the fact that it looks immune to AI. No matter what happens in terms of AI disruption, humans are still going to have to eat. So, supermarkets appear to be a pretty safe bet from an investment perspective.
Another plus is that it offers exposure to a range of different supermarket companies (although Tesco and Sainsbury’s are its main customers). This is valuable as the UK supermarket industry is highly competitive and individual companies have been known to underperform at times.
Of course, we also have the monster dividend yield. This is a huge attraction. Naturally, the yield isn’t guaranteed. However, REITs are required to pay out 90% of their income to shareholders as dividends so the stock should provide plenty of cash flow for investors in the years ahead.
Finally, we have a rising share price. I suspect this stock is seeing more attention as investors seek out companies immune to AI disruption.
An investment opportunity?
Now, there are a few risks to consider. One is interest rates. In 2022, REITs were hammered when interest rates surged (because higher rates translate to higher interest payments on loans for property companies). Another move higher in rates could lead to share price losses for investors.
The growth of online shopping is also something to think about. In the long run, this could see fewer people visiting physical grocery stores.
Overall though, I see a lot of appeal in this FTSE 250 stock in the current environment. I believe it’s worth considering for a portfolio today.
