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Land Securities Group (LSE:LAND) is an earnings inventory with a very good monitor report of rising its dividend. For the yr 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).
Nonetheless, a falling share value could possibly be an indication that buyers really feel the inventory’s overpriced. Others may 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 a minimum of 90% of its tax-exempt rental earnings to shareholders by the use 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. Nonetheless, in my view, I believe the group will be capable to develop its earnings (and its dividend) over the approaching years.
Please word that tax therapy depends upon the person circumstances of every shopper and could also be topic to vary in future. The content material on this article is offered for info functions solely. It isn’t meant 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 workplaces and retailers in Central London, buying centres exterior 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 earnings was 5% larger than in FY24.
Regardless of this, the group seems to be 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 seems to be low cost. They’ve a median 12-month value goal of 702.5p. That is practically 29% larger than at the moment’s share value.
Ultimate ideas
Nonetheless, the group stays susceptible to the upper rate of interest setting by which we discover ourselves. A better price 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 circumstances, go bust.
As well as, the business property sector may 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 — a minimum of within the quick time period — to recommend that this specific REIT is in good monetary form and in a position to assist development 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 business actual property market basically — quite than something particular to Land Securities. On this foundation, I believe the inventory’s value contemplating.
