Is this FTSE 250 dividend stock too cheap to ignore after the stock market crash?

There’s plenty of British blue chips looking massively oversold today. Hammerson (LSE: HMSO), despite the existence of some mid-bending yields, isn’t one that falls into this category. I’d argue that current ratios suggest the retail property giant has all the hallmarks of a classic investment trap.

Recent share price falls leave Hammerson dealing on a forward price-to-earnings ratio of 3.9 times yet sporting a mighty 22% dividend yield. It suggests that markets are not just expecting the 2020 payout to disappoint. It’s that investors fear that the FTSE 250 business, which City analysts expect to record a 24% profits drop this year, will struggle for a very long time.

Springboard data disappoints

Latest data from Springboard illustrates the huge trouble retailers are facing as the coronavirus spreads. In what the research house described as an “unprecedented decline,” it said that footfall across the retail sector plummeted 21.7% week on week in the seven days to 15 March.

Footfall was down 28% on an annual basis, too, a result which was three times greater than the worst result Springboard has ever recorded.

Unsurprisingly customer trips worsened markedly as the period rolled on, too. A week-on-week drop of 18.2% during the Sunday before last escalated to a 38% decline by the Saturday. It goes without saying the rate of reversal has deteriorated in more recent days, too, reflecting a mix of rising fear among citizens and government attempts to enforce a lockdown and stop shopping trips for ‘non essential’ goods and services.

Pan-European operator

Hammerson is best known for owning flagship shopping centres like Birmingham’s Bullring and London’s Brent Cross. It also owns stakes in a great many retail sites across Europe like critical eurozone economies Germany, France, and Spain. Incidentally, that Springboard data also showed shopping centre footfall here in the UK drop 20.3% week on week.

Hammerson had enough on its plate already, with ongoing Brexit-related uncertainty continuing to plague consumer confidence and threatening to push the retail sector into the danger zone.

Net rental income slumped 11.2% in 2019 as a growing number of its tenants either went into administration or entered a company voluntary arrangement (CVA). This caused pre-tax losses to balloon to £573.8m from £173.3m a year earlier.

Dividends to disappoint?

On the plus side, Hammerson’s been more successful in cutting its debt pile. Net debt of £2.4bn as of December came in well below its £3bn target, helped by asset disposals. This is not enough to protect the dividend, though. The business warned that the annual payout will be “rebased to a sustainable level” in 2020.

City analysts expect the total payout to drop to 18.9p per share from 25.9p in recent years, though that debt mountain, a worsening earnings outlook, and meagre dividend coverage of 1.1 times suggest that a much bigger cut could be in the offing. This is a share I for one plan to avoid at all costs.