Market demand for reopening shares — stocks which investors think will thrive as Covid-19 lockdowns end — has shot through the roof recently.
And at first glance, Land Securities (LSE: LAND) would seem to be a great reopening stock for dividend lovers. City analysts think this FTSE 100 share will report earnings growth of 34% and 7% in the fiscal years to March 2022 and 2023 respectively, as Covid-19 lockdowns end and the public flock back to its shopping malls and office complexes.
They’re projections which prompt expectations of meaty annual dividend hikes. And as a result, Land Securities boasts big yields of 5% and 5.5% for financial 2022 and 2023. To crown things off, the company trades on a rock-bottom forward price-to-earnings growth (PEG) ratio of 0.5. Any reading below 1 suggests a UK share is undervalued by the market.
The pros and cons of this reopening stock
On paper, there’s clearly a lot to like about Land Securities. But I’ve severe reservations about retail-exposed property companies like this as robust reopening stocks. It’s not just because the predicted number of business casualties in the short-to-medium term could balloon if coronavirus rates tick up again and lockdowns return. It’s because rising cost pressures for retailers, the soaring popularity of e-commerce, and increasing consumer spending on leisure and experiences over goods create huge long-term challenges for the company.
The mass adoption of flexible working practices after Covid-19 might smack the need for Landsec’s offices too. Though there are suggestions that predictions of seismic changes in the way people work might have been exaggerated. Take recent data from KPMG as an example. Its survey of chief executives showed that 17% plan to downsize their office space following Covid-19. That compares with almost 70% of executives it quizzed in August.
On the plus side, Landsec is taking steps to rejuvenate its retail spaces to bring customers back in their droves. These measures include diversifying the tenant mix in its shopping centres away from pure retail and taking steps to improve the customer experience. It’s also selling off non-core leisure, hotel and retail park assets to redeploy capital into higher-growth areas.
Are these superior UK shares?
In my view though, the threats to Landsec’s long-term future far outweigh the possible opportunities for investors. This is why I won’t be buying this reopening stock for my Stocks and Shares ISA. I think there are much better property shares to buy for strong profits growth and big dividends today.
Indeed, I bought 3.8%-yielding Tritax Big Box for my ISA back in 2020. Even though this property play could also see tenants default if consumer spending slumps, I feel that its critical role in warehousing and logistics makes it a great way to play the e-commerce explosion.
I’m also thinking about buying The PRS REIT for my UK shares portfolio. I think a shortage of rental homes makes this accommodation supplier a great buy, despite concerns over an overheated housing market. This UK share carries a mighty 4.7% dividend yield.