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Land Securities Group (LSE:LAND) is an revenue inventory with a very good monitor file of rising its dividend. For the 12 months ended 31 March 2025 (FY25), it declared a payout of 40.4p a share, 49.6% larger than for FY21.
However over this era, its share value has fallen 21%. This has helped push its yield to 7.4%, which places it within the prime six of FTSE 100 dividend payers (at 17 September).
Nevertheless, a falling share value may very well be an indication that traders really feel the inventory’s overpriced. Others would possibly query the sustainability of its dividend.
Let’s take a better look to see whether or not both of those fears is justified.
Particular standing
The very first thing to notice is that the inventory is an actual property funding belief (REIT). To profit from sure tax benefits, a REIT should pay at the least 90% of its tax-exempt rental revenue to shareholders by means of dividends every year.
However this doesn’t give any perception into its potential revenue. In spite of everything, 90% of nil isn’t value something. Nevertheless, in my view, I feel the group will be capable of develop its earnings (and its dividend) over the approaching years.
Please be aware that tax remedy is determined by the person circumstances of every consumer and could also be topic to vary in future. The content material on this article is supplied for data functions solely. It’s not supposed to be, neither does it represent, any type of tax recommendation.
A diversified portfolio
A lot of my optimism comes from the truth that it owns many high-profile properties together with One New Change and Liverpool ONE. Its three principal divisions are places of work and outlets in Central London, buying centres outdoors the capital and mixed-use residential developments. These portfolios are valued at £6.7bn, £2.6bn and £0.8bn, respectively.
As additional proof of the standard of its portfolio, when the group re-lets or renews a lease, it’s in a position to command a median rental uplift of 8%. Additionally, its contracts present for index-linked will increase. Throughout FY25, its like-for-like web rental revenue was 5% larger than in FY24.
Regardless of this, the group appears undervalued to me.
At 31 March 2025, it had a e-book (accounting) worth of £6.53bn. At the moment, its market cap is £4.13bn. This suggests a 36.8% low cost.
And analysts seem to agree that the corporate’s inventory appears low cost. They’ve a median 12-month value goal of 702.5p. That is almost 29% larger than right this moment’s share value.
Last ideas
Nevertheless, the group stays weak to the upper rate of interest surroundings by which we discover ourselves. The next value of capital makes it costlier to borrow the cash wanted to purchase extra properties and develop. And it squeezes the incomes of its tenants, which could imply they search for cheaper premises or, in excessive instances, go bust.
As well as, the industrial property sector might be delicate to an financial downturn.
Though the UK economic system seems fragile, the standard of the properties owned by Land Securities will give it some safety ought to the scenario deteriorate additional. To protect some headroom, it seeks to maintain its mortgage to worth ratio within the “mid-30s”.
And regardless of dividends by no means being assured, I see sufficient proof — at the least within the brief time period — to recommend that this specific REIT is in good monetary form and in a position to help progress in its payout. I believe the autumn within the group’s share value in all probability displays fears in regards to the UK economic system — and the industrial actual property market typically — fairly than something particular to Land Securities. On this foundation, I feel the inventory’s value contemplating.
