Everybody should try to generate a second income for their retirement. In my view, a Stocks and Shares ISA is a good way. It’s highly flexible, allows you to build a balanced portfolio of shares, and the growth and income are free of tax. For life.
But how much does an investor actually need tucked away to generate, say, £999 a month in passive income?
The answer depends on the yield. Somebody targeting that amount would generate £11,988 a year in income. Here’s roughly what that would require:
4% yield – £299,700
5% yield – £239,700
6% yield – £199,800
Naturally, the higher the yield, the less capital required. That’s why many income investors hunt around the FTSE 100 for high-yielding dividend shares that can keep the cash flowing year after year. There’s plenty of choice too.
Could this FTSE 100 property stock deliver?
One income stock that’s sometimes overlooked is Land Securities Group (LSE: LAND), also known as Landsec. It owns offices, shopping centres and retail parks across the UK, generating rental income from tenants and capital growth from property sales.
Landsec’s structured as a real estate investment trust (REIT). These trusts escape corporation tax provided they distribute at least 90% of their property rental profits to shareholders. As a result, they often produce chunky yields.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
Today, Landsec yields a hefty 6.35%. That’s a sizeable income stream. But there are one or two issues I want to highlight first.
First, UK property has endured a grim few years. Working from home hit demand for offices, online shopping has hit retail destinations, and soaring interest and mortgage rates have smashed property shares generally.
So the Landsec share price is broadly flat over one year and down 12% over five years. That may frighten some investors.
Yet the business remains profitable. Full-year results (14 May) showed occupancy rates at a 20-year high. Landsec uses EPRA earnings as its primary underlying profit metric. Lately, they’ve been pretty static:
- 2025 – £377m
- 2024 – £374m
- 2023 – £371m
- 2022 – £393m
- 2021 – £342m
The shares trade on a price-to-earnings ratio of 12.4, which is pretty modest. Although given all the pressures facing commercial property, I might have expected them to look even cheaper.
What factors might spark a recovery?
If inflation continues to rise because of the Iran conflict, interest rates could stay elevated for longer. That’s bad news for property companies, which rely heavily on borrowing. I also worry that parts of the office market may never fully recover after the pandemic shift towards hybrid working.
But when rates do start falling, property shares could rebound sharply. Investors may simply need patience. In the meantime, that dividend income offers compensation for waiting.
For me, Landsec looks more attractive for income than growth. I’d personally want to balance it with FTSE 100 shares that offer stronger long-term share price momentum too. Still, investors building a diversified ISA portfolio may think it’s worth considering. And with all dividends sheltered from tax inside an ISA, it could be a great way to build that second income stream.
Check out other FTSE 100 income stocks first though, you might like them even more.
Should you invest £5,000 in Land Securities Group Plc right now?
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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Land Securities Group Plc made the list?
Harvey Jones does not hold any positions in the companies mentioned.
