Is FTSE 100 property share Land Securities Group (LSE: LAND) too good for income investors like me to miss? It boasts a dividend yield of 4.6% for the financial year to March 2022. This reading moves to 5% for the following fiscal 12-month period too.
There are plenty of people who believe the property giant will recover strongly when the pandemic passes, supported by the company’s many self-help measures. These include building more homes to capitalise on the UK’s rock-solid housing market, and revamping its retail assets with a great focus on improving the customer experience.
But I’m not one of these glass-half-full people. Okay, those yields look mighty attractive. But it’s possible that the pandemic will last long into the future, a devastating scenario for both its office and retail portfolio.
Latest data from researcher Springboard showed store visits during the Boxing Day sales down a whopping 45% from pre-pandemic levels as consumers fretted over soaring Covid-19 infection rates.
Dicing with danger
This news is particularly worrying given the huge debts Landsec nurses. Adjusted net debt stood at an eye-watering £3.5bn as of September. However, my fears over the FTSE 100 firm stretch well beyond the immediate term.
I’m concerned what impact changing employee habits will mean for office space demand as flexible working takes off. The rapid growth of e-commerce also poses a massive danger to future profits.
Sure, Land Securities boasts huge dividend yields. It also offers great value in terms of predicted earnings (a forward price to earnings growth (PEG) ratio of 0.5 sits well inside bargain-basement territory of 1 and below). I think the risks of buying Landsec shares far outweigh the possible rewards.
A FTSE 100 dividend share I’d rather buy
As I say, Land Securities’ increased focus on the UK housing market is a step in the right direction. But, as an investor, wouldn’t I be better off exploiting this theme by buying a pure housebuilding share? I think so. It’s why I’m considering snapping up some Berkeley Group (LSE: BKG) stock today.
Some interesting news on regional homes demand caught my eye over Christmas. Property listings business Rightmove said that “in recent months we’ve seen higher demand to live near London, with buyer inquiries returning towards pre-pandemic levels.”
Flat demand in particular is spiking and this bodes particularly well for Berkeley. This particular housebuilder is focussed on building homes in the capital and the Southeast England.
My main concern for housebuilders is the rate at which building material costs are rising. The product shortages driving up costs also threatens to hit building rates too. However, it’s my opinion that the potential rewards for housebuilders (and their shareholders) as property prices boom more than offsets this risk.
Today, Berkeley boasts a big 6.6% dividend yield for this fiscal year (to March 2022). The dial remains elevated at 5% for financial 2023 too. This is a FTSE 100 share I’d happily buy today and hold for years to come. I expect homes demand to continue outpacing supply long into the future.