Typically, UK shares across the FTSE have offered dividend yields that sit close to 4%. However, after a stellar 2025, higher stock prices have dragged down the yields of the UK’s flagship indexes. The FTSE 100 now only offers a payout of around 2.9%, while the FTSE 250 is closer to 3.3%.
The good news for stock pickers is that there are still plenty of higher-yielding opportunities to explore.
So, with that in mind, let’s break down how investors with £5,000 to invest today can aim to unlock a 7.4% yield in 2026.
High-yielding opportunities
Right now, there are over 70 stocks in the FTSE 250 with a yield larger than 4%. And among these stands Supermarket Income REIT (LSE:SUPR) with its 7.35% — almost exactly in line with our target of 7.4%.
So, should investors just snap up £5,000 worth of Supermarket shares and call it a day? Sadly, it’s not that simple.
Experienced investors already know that higher payouts almost always come with higher risks. Don’t forget, unlike the interest paid on bonds, dividends are completely optional for a company. Yet, there are always some exceptions. And sometimes the risk ends up being worth taking.
So, is that the case with Supermarket Income REIT?
Risk versus reward
As a quick introduction, this company owns and manages a real estate portfolio of supermarket properties across the UK and France.
Given that supermarkets tend to see continuous footfall even during economic downturns and leases on supermarkets often span decades, the company has established a pretty reliable source of cash flow. What’s more, with around 77% of its rent inflation-linked, rent organically grows over time without needing to wait for leases to expire before prices are adjusted.
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This continuous and predictable stream of income is actually how management has been able to raise shareholder payouts for seven years in a row so far, boosting the yield in the process.
But this is where things get a bit tricky. While interest rates have started falling, they’re nonetheless still significantly higher compared to a few years ago. Consequently, looking at its latest results, earnings actually fell short of dividends. In other words, the company paid out more to shareholders than it brought in.
The issue isn’t a result of a lack of occupancy or tenants not paying their rent on time. In fact, impressively, the company has maintained 100% occupancy and 100% rent collection since its IPO in 2017. Instead, the problem is debt.
Expanding a real estate portfolio isn’t cheap. And just recently, the group has borrowed yet another £250m through a bond offering at a 5.125% interest rate.
This move provides some welcome near-term capital flexibility. But it further ramps up the pressure on earnings, and in turn dividends – this is the risk income investors face.
The bottom line
With interest rate cuts taking their time and leverage on the rise, the sustainability of Supermarket Income REIT’s dividend is looking a bit wobbly. But as interest rates continue to fall, the group’s debt burden could prove far less troublesome over time, allowing dividends to keep growing.
Personally, the risk profile is a bit too high for my tastes. But luckily, there are still plenty of other high-yield dividend stocks to choose from when hunting for a 7.4% payout.
