Today, there’s light on the horizon. The UK’s largest commercial property development and investment company Land Securities Group (LSE: LAND) has announced it will reinstate dividends later this year. This bargain-priced FTSE 100 company says its tenants are now reopening premises and welcoming customers back.

This is another step out of lockdown, with the government further easing restrictions tomorrow. Investors should be cautiously celebrating.

Check out the Land Securities share price

Today, Landsec issued a promising update on June rent collection, and its share price is up around 2% as a result. All of its shopping centres and outlets are now open. On 30 June, some 79% of its retail units were trading, while 16 of its 18 leisure parks were also open. 

Landsec management said footfall levels are “encouraging”. They’re around 60% of last year levels, but like-for-like store sales have increased by 80%. As seen elsewhere in the retail industry, customers are venturing out less, but spending more when they do. You may find other FTSE 100 retail bargain stocks as a result.

The £4.33bn’s group’s estate of high-quality offices is also open, with occupancy levels rising as customers return to work. Only its Accor-managed hotels remain closed, but with a phased opening planned over the next three months.

I’d buy this bargain FTSE 100 stock

On 24 June, £122m of rent fell due. Of this, 60% was paid within five working days, which is well down from 94% last year. The group is holding “supportive and constructive dialogue” with tenants who’ve fallen behind. It has allocated £9m of “concessions”, out of its £80bn rent relief war chest. The pandemic will still hurt Land Securities.

Today’s update is a positive sign the economy is creaking back into life, and I’m hoping the process should accelerate. Just as long as we don’t get further lockdowns.

Management also said Landsec is “financially robust”. At 30 June, adjusted net debt stood at £3.92bn, down marginally from £3.93bn at 31 March. It has £1.2bn of cash and available facilities, boosting my faith in this FTSE 100 stock’s bargain potential. Today’s upbeat update is encouraging, coming so shortly after shopping centre management and development company INTU went into administration.

I’m calling this FTSE 100 share a bargain because its share price is still down 40% since the start of the pandemic. That leaves it trading at 10.3 times earnings, if you can rely on traditional valuation metrics such as the P/E ratio. I’m not sure you can though.

The board now intends to reinstate payments following its half-yearly results announcement on 10 November. If you’re looking for long-term income, keep a close watch on this bargain FTSE 100 stock. I think it’s on the way back.

Here’s another to consider right now…

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Landsec. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With all these headlines, wouldn’t it be easier if you could just click a button and get into the buy-to-let market without having to worry about anything else?

The good news is, is you can do just that with stocks. Today I’m going to highlight two FTSE 100 companies that operate large real estate portfolios and both offer dividend yields of nearly 6%.

London landlord

Landsec (LSE: LAND) is the UK’s largest publicly traded property company. Right now, investors can snap up shares in this business at just a fraction of what they are worth. At the end of March, the firm reported a net asset value per share of 1,339p, compared to the current share price of around 820p, implying the stock is trading at a 39% discount to net asset value.

However, I don’t think this figure is entirely accurate because, in some areas of the market, commercial property values are falling. With more than half of its property portfolio located in London, Landsec is insulated from this trend to some degree, but the firm is still feeling the pressure. In the year to the end of March, the value of its property portfolio declined by nearly 5%.

That being said, I think it is highly unlikely that property values will decline the 39% that the market is currently implying. On that basis, I reckon the stock looks good value at current levels.

As well as the cheap valuation, shares in Landsec also support a dividend yield of 5.8% so investors will be paid to wait for a recovery in market sentiment.

Growth ahead

Shares in British Land (LSE: BLND) are suffering from the same overhang as LandSec.

Investors are avoiding the business due to its exposure to commercial retail property. For its part, British Land is trying to diversify away from this market. It has been selling retail properties and re-investing the proceeds in offices and big projects.

These include the multi-billion pound Canada Water project, which recently received the green light. The £3.3bn project will create more than 3,000 homes and the first new London high street in 100 years as well as more than 1m square feet of office space.

This project could potentially unlock billions of pounds in value for the company, although right now, it does not look as if the market believes it will ever happen.

Shares in the real estate investment trust are dealing at a price to tangible book value of 0.6. I do not believe that this discount takes British Land’s development pipeline into account. On top of the deep discount to net asset value, the stock currently supports a dividend yield of 5.8%.

So, if you are looking to invest in the property industry, I highly recommend checking out this undervalued property giant with its market-beating dividend yield.

The post Forget buy-to-let! I like these FTSE 100 landlords that yield 6% appeared first on The Twelfth Magpie.

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• How much do you need in an ISA to earn £19,999 a year on top of the State Pension
• How much is needed in FTSE 100 stocks to make £1,547 in monthly second income?

Rupert Hargreaves owns British Land Co and Landsec. The Motley Fool UK has recommended British Land Co and Landsec. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Underperforming

The business owns and operates nearly £14bn of offices, retail parks, shopping centres, hotels and warehouses across the country. Together, these assets throw off hundreds of millions of pounds in rental income every year, and most of this is returned to shareholders because of LandSec’s REIT structure.

Over the past 12 months, shares in the real estate company have plunged in value. Including dividends, its shares have returned -10% over the past year, and they’ve underperformed the FTSE 100 by around 9% per annum during the past five years.

Following this performance, at the time of writing, the stock is trading at a discount of 40% to its net asset value, which looks to me to be too cheap to pass up.

The Brexit question

The question is, why is this real estate giant trading at such a deep discount to the value of its assets? The answer, like so many others at the moment, seems to be Brexit. Investors appear to be concerned about what will happen to the UK commercial property market if the UK leaves the European Union without a deal at the end of October. And rather than waiting to find out, they’re selling up.

On top of this, LandSec has a lot of exposure to retail properties. Several companies in its portfolio have already forced through CVAs and there could be more to come. As the crisis in the retail sector has taken its toll on property values, the enterprise informed investors back in May that its assets declined in value by £557m during its financial year to the end of March.

Look to the future

Still, despite this pressure, I think investors’ concerns about the company are overblown. LandSec might have had to mark down its property values in its last fiscal year, but revenue profit, a measure that excludes property price swings, jumped 8.9%.

On top of this, thanks to the booming demand for office property in London, the firm has decided to re-start the development of three speculative office developments in the capital this year, after holding off since 2016.

This change in direction seems to suggest management believes London’s property market is ripe for investment, and I think this is a positive sign for investors.

As well as its yawning discount to net asset value, shares in LandSec also support a dividend yield of just under 6%, at the time of writing. This means you’ll be paid to wait for market sentiment to improve. With an upside of nearly 70% on offer to net asset value, I think it will be worth the wait.

The post A 6%-yielding FTSE 100 dividend stock at a rock-bottom price I’d buy appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns shares in Landsec. The Motley Fool UK has recommended Landsec. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Land Securities Group (LSE: LAND) has emerged as one of those gainers, a surprising development in my book given the chances of an economically-destructive withdrawal from the European Union and the shocking blow this would likely deliver to the retail sector.

Things are already looking more than just a tad shaky for Landsec, as it now likes to be known, the largest publicly-listed owner of commercial real estate in Britain. Some 42% of its £13.8bn property empire comprises retail parks, shopping centres, hotels and shops spanning the length and breadth of the country. And it has further exposure to consumers via the retail units that support its workspace assets in London.

Retail on the rack

We all know the intense pressure that UK shopkeepers are under as Brexit uncertainty prompts consumers to keep the pursestrings tightly drawn. Which is just great. It’s not as if the bricks-&-mortar stores are already suffering enough from the relentless progress of e-commerce, right?

Just ask Marks & Spencer and Debenhams how tough conditions are right now, businesses which continue to slash store numbers left right and centre, or Majestic Wine and N Brown who are casting adrift their entire physical estates altogether.

The consequences for the likes of Landsec was laid bare last week when Arcadia Group, the owner of Topshop and Miss Selfridge, successfully lobbied for its landlords to cut rents to help it stave off bankruptcy. The fear now is that others will be quick to line up and ask for the same — media reports suggest Monsoon Accessorize is the latest retail giant to have gone cap in hand to its creditors.

Divi on the block?

It’s not like Landsec is a stranger to such problems, though. Pre-tax losses widened to £123m in the year to March, from £43m previously as asset values fell, and particularly so for its retail properties as rents fell and vacancies increased.

Despite these tidal waves though, the Footsie firm felt confident enough to hike the annual dividend 3.1% for then to 45.55p per share. So can investors expect another uplift in the reward? City analysts certainly think so, and they’re predicting a 49p payout, an estimate which yields a cracking 5.9%.

I’m more than a little sceptical over whether Landsec will meet these hot forecasts, however. Firstly the predicted dividend is covered just 1.2 times by expected earnings, falling well short of the widely-considered safety mark of 2 times and above. And while the company has remained a cash machine of late — free cash flow swelled 66% in fiscal 2019 — debt continues to increase. Its adjusted net debt rose to £3.74bn last year from £3.65bn previously.

Will the company be able to service this in the event of profits continuing to sink, or will it hunker down, reduce dividends and try to ride out the storm? It’s more than possible, in my opinion, and this is why I think investors seeking big dividends should probably avoid it right now.

The post Will this FTSE 100 dividend stock, yielding 6%, be next to cut the payout? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Landsec. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Insurance income

First up there’s Admiral (LSE: ADM). This firm is probably one of the best-managed insurance businesses in the UK, and it shows in the group’s profit margin. Last year the company reported an operating profit margin of 37.7%, compared to the UK insurance industry average of 10.5%. 

A strong focus on managing risk as well as reducing costs over many years has helped the company get to where it is today, and it doesn’t look as if this is going to change any time soon.

The UK insurance market is extremely competitive, which Admiral’s management knows all too well. So, rather than getting tangled up in a race to the bottom on price, chasing growth at the expense of profitability, the company has decided to branch out into other businesses. It recently launched Admiral loans, which has already lent out more than £300m, although it is not profitable just yet. 

In addition, the group is also investing in its presence overseas. It has a large business in Italy, Spain and France as well as a presence in the United States. In aggregate, these businesses are still making a loss, but just like the loans business, I’m excited about their future potential. The number of international car insurance customers increased by 18% in 2018 to 1.22m and losses from the international division decreased by £13.2m. In 2017, Admiral’s international arm lost £14.3m. Last year the loss had improved to £1.1m indicating this business will start contributing to the bottom line in 2019 or 2020.

All of these growth initiatives are good news for the company’s dividend outlook. Analysts believe the firm will pay out 137p per share in 2019, giving a dividend yield of 6.1% and it seems to me as investors could see substantial dividend growth in the years following. That’s why I’ve added this stock to my ISA.

Bricks and mortar

Another FTSE 100 income stock I like is Landsec (LSE: LAND). This is the UK’s largest listed property company with a market capitalisation of £6.8bn. 

Recently, the stock has come under pressure as investors are worried about the company’s exposure to the UK High Street. Rising retail bankruptcies are bad news for landlords who have to take the property back and might not find another tenant to take on the lease.

However, in my opinion, Landsec is relatively insulated from this trend. Virtually all of the company’s retail properties are located in central London, and while its retail parks and shopping centres are spread around the rest of the UK, overall, retail properties only make up around 40% of the mix. The rest is made up of hotels, London offices and shops in London. 

As the values of London properties have remained relatively stable over the past two years, I do not think Landsec deserves to trade at its current discount to net asset value of 34%. As well as this discount, the shares also support a yield of 5.3%. A yield of 5.3% from central London property is too good to pass up in my opinion.

The post 2 FTSE 100 dividend stocks I’d buy before the ISA deadline appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns shares in Landsec and Admiral Group. The Motley Fool UK has recommended Landsec. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Quite an inexplicable little surge, in my opinion. As I noted in a recent piece about National Grid, investing in utilities at tense times like this can be a good idea. But I wouldn’t stretch this line of argument to cover SSE or its FTSE 100 peer Centrica (LSE: CNA), though, as the exodus of customers from their retail operations remains a major problem.

To underline this, data released this week from trade association Energy UK showed that 2018 was a record year for energy switchers, some 5.8m power customers — or to put that into context, one in five households — changing supplier during the year.

This was up 6% from 2017’s then-record 5.5m switches. What’s more, the data showed that the level of switching activity picked up as last year progressed, with 464,378 users changing provider in December, up 10% year-on-year.

Particularly worryingly for the so-called Big Six suppliers was that more than a fifth of all switches last month involved moving to a small- or medium-sized energy provider, illustrating the pull that those cheaper independent suppliers are having in hard times for British household budgets.

Under pressure

Things look set to remain difficult for some time yet, then. The increasingly-hostile chatter from consumer groups, regulators and politicians alike suggests that the price caps introduced in late 2018 may not be the end of the matter and that things could get much, much worse for the major suppliers’ future levels of profitability.

I’m not actually concerned by their relatively low valuations, Centrica carrying a forward P/E ratio of 11 times and SSE sporting a corresponding multiple of 14.9 times, nor am I interested in their prospective dividend yields of 9% and 7% respectively. The fact is, I wouldn’t touch either with a bargepole right now.

A better income stock?

Could Landsec (LSE: LAND) be a better bet for value and dividend investors?

In the current fiscal year, the commercial real estate investment trust is expected to record an 8% earnings rise, and this leaves it dealing on a cheap forward P/E ratio of 14.3 times. It also means that City analysts are forecasting another chunky increase in the annual dividend, leaving Landsec with a giant 5.6% dividend yield for the year.

But like Centrica and SSE, I’d be tempted to stay away from the Footsie firm today. The decelerating UK economy threatens to hammer demand for the company’s commercial property in the near-term, and possibly for much much longer if Brexit goes off with a destructive bang.

As JP Morgan commented this week when it downgraded Hammerson, rental growth is expected to deteriorate for European retail property owners in 2019. And in my opinion, the likes of Landsec should be braced for difficulties here, and for other critical parts of the domestic economy, this year and thereafter.

The post To hell with these FTSE 100 dividend stocks and their 7%+ yields! I’d avoid them at all costs appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Landsec. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With this being the case, rather than investing in buy-to-let, I’ve put my money in two blue-chip property stocks that I think look particularly attractive at the moment.

Real estate investing

Landsec (LSE: LAND) and British Land (LSE: BLND) are the UK’s two largest listed real estate investment trusts. Recently, investor sentiment has turned against these two companies because they both have exposure to retail assets. 

However, in my opinion, it seems the market is only concentrating on the negatives here, and ignoring the best qualities of these two property giants. For example, while both companies have exposure to retail assets, exposure is relatively limited, and managements are taking action to shift the portfolios away from low-quality properties.

According to the company’s most recent report on its property holdings, at the end of September, around 39% of Landsec’s £14bn property portfolio was comprised of retail assets outside of London, including the group’s 30% interest in giant mall Bluewater. British Land has a higher allocation, with around 50% of assets invested in properties. Management wants to bring the figure down to between 30% to 35% in the near term. To that end, the firm has sold or agreed on the sale of £634m (roughly 10% of the retail portfolio) in the 12 months to the end of September. 

Undervalued 

While it is true that these retail properties could cause British Land and Landsec some problems in the years ahead, the market is currently suggesting that these properties are worth 40% less than the two companies think they are, which seems unrealistic. 

At the time of writing, shares in Landsec and British Land are trading at a discount to net asset value of 40% and 44% respectively. In fact, these valuations imply the retail components of both companies’ property portfolios are worth zero. It is difficult to imagine any scenario where these companies would have to sell their properties for 40% less than they are currently worth, so I think this is a great opportunity for value-seeking investors to buy two well-diversified retail investment trusts at deeply discounted valuations.

As well as attractive valuations, these two stocks support market-beating dividend yields. Shares in Landsec and British Land currently yield 5.8%. 

The bottom line 

Overall, I think shares in both are a steal today. While the outlook for these two businesses is not crystal clear, I reckon the market is overstating the worst case scenario.

With this being the case, I’m happy to snap up shares in these two high-quality property stocks at an extreme discount. 

The post Forget buy-to-let! My money’s on these FTSE 100 property stocks in 2019 appeared first on The Twelfth Magpie.

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• How much is needed in FTSE 100 stocks to make £1,547 in monthly second income?

Rupert Hargreaves owns shares in British Land Co and Landsec. The Motley Fool UK has recommended British Land Co and Landsec. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Anto angst

Investors in Chilean copper miner Antofagasta (LSE: ANTO) have endured a tricky year, with its stock down 23% in 12 months. The £7.5bn FTSE 100-listed company has been hit by the 20% drop in the copper price this year, and US President’s Donald Trump’s trade war on China.

Some investors may have given up on Antofagasta, whose share price spiked to 1,600p in December 2010, but almost eight years’ later idles at 767p. With doom-mongers predicting a recession in 2019 or 2020, and Chinese demand slowing along with its economy, this would be a brave time to dive into Dr Copper.

REIT said Fred

While Antofagasta’s earnings per share (EPS) are forecast to fall 16% this year, analysts say they may rebound 30% in 2019. That’s mining stocks for you. The income disappoints, with a modest forward yield of 2.8%, albeit with healthy cover of 2.3. It trades at a relatively pricey 16.6 times earnings, so it’s not a huge bargain. I would wait with this one.

Real estate investment trust (REIT) Landsec (LSE: LAND), formerly Land Securities, has also had a tough year. Its stock is down around 20% with the UK construction and property sector hit by Brexit turmoil. It owns a string of shopping centres around the UK, including Bluewater in Kent, Lakeside Thurrock and Gunwharf Quays in Portsmouth, and has been hit by the retail slowdown, while the London office market also stumbled.

Brexit mess

The company swung from a £112m profit before tax to a £251m loss last year, although that was partly due to the cost of refinancing £1.5bn, which reduced its weighted average cost of debt to 2.6%, and lengthened the duration to 13.1 years.

Landsec trades at 14 times earnings – cheap, but not that cheap. The dividend looks juicy, though, with a forecast yield of 5.6%, and cover of 1.2. Five consecutive years of positive EPS growth looks set to continue with a 7% forecast for the year to 31 March 2019, and 2% the year after. If we get a Brexit deal, the economic snap-back could give it a real boost. That’s a big if, though.

Fallen empire

It’s been a desperate year for the world’s biggest advertising company WPP (LSE: WPP), with its share price dropping 26% and Sir Martin Sorrell quitting after more than 32 years at the helm, amid a personal misconduct inquiry. Given that he built the £13bn giant from a small Kent-based maker of wire baskets in 1985, that’s quite some loss, while the group also lost key contracts with big clients, including its oldest and largest with the Ford Motor Company.

So WPP is a company looking to forge a new way in the world, and you can buy at a bargain entry point of just 9.2 times earnings, with a forecast yield of 5.7%, and cover of 1.9. What you don’t get is Sorrell, a one-man driving force whose sprawling empire – 200,000 staff across 120 companies – may now crack and break up, as empires are prone to do.

Like all three of these stocks, it is an opportunity… but a risky one.

The post These 3 FTSE 100 dividend champions have crashed around 20% in 12 months. Is it time to load up? appeared first on The Twelfth Magpie.

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• Hot, hotter, hottest. Is it too late to consider these 3 FTSE 100 shares?

harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Landsec. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Today I’m looking at three such opportunities for investors of all experiences, that could help you sleep better at night.

Prime property

My first low-risk FTSE 100 pick is Land Securities (LSE: LAND). Property is one of the safest assets around, and as the largest publicly traded landlord in the UK, I think this real estate investment trust should be a part of any low-risk portfolio.

Right now, shares in the business are at sale prices. The stock has declined by nearly 20% over the past two years, underperforming the FTSE 100 by 30%, excluding dividends, due to concerns about the impact Brexit might have on the UK property market.

However, while skittish investors have been jumping ship, Land Securities’ high-quality property portfolio gives me confidence in its long-term potential. Nearly half of its capital value is invested in offices across the City of London and West End, two markets that are unlikely to see a significant decline in property values. 

The company is trading at a 30% discount to net asset value, which to my mind is far too steep. And on top of this bargain valuation, Land Securities yields around 5%.

Booming business

My next low-risk pick is global cruise operator Carnival (LSE: CCL). This travel company often flies under the radar of investors because it’s hardly the world’s most exciting business. But while some investors might be put off by the firm’s slow and steady nature, it could be the perfect buy for low-risk investors.

Carnival is the biggest cruise operator in the business. Its size gives it a huge advantage over other operators. For example, as the group has grown since 2012, its operating profit margin has increased from 10.7% to 18.6% currently. 

Growing economies of scale, as well as rising revenue has helped net profit more than double over the past five years. City analysts have pencilled in earnings per share (EPS) growth of around 7% per annum in 2018 and 2019 — above the industry average growth rate of 5% per annum.

Despite this impressive growth, shares in the company are changing hands for a relatively undemanding 13 times forward earnings. There’s also a dividend yield of 3.2% on offer.

Trusted business

My final low-risk FTSE 100 pick is St James’s Place (LSE: STJ). In the wealth management business, reputation counts for everything. Thanks to its size and rich heritage, it has one of the best reputations in the industry.

Customers flocked to the company last year. Assets under management (AUM) in 2017 grew 20% to £90.7bn, as new customers joined and old customers stayed. The positive trend has continued into 2018. At the end of the first half, AUM had risen to £96.6bn.

City analysts are expecting inflows to push EPS up 72% for 2018 to 47p per share, and further growth of 19% is expected for 2019.

Unfortunately, the market is already placing a premium on the stock so you are going to have to pay up to take part in St James’s growth story. The current price is 24.6 times forward earnings. Considering the company’s rate of growth and its reputation, however, I reckon this is a price worth paying. The stock yields 4.7%.

The post 3 great FTSE 100 stocks for low-risk investors to consider appeared first on The Twelfth Magpie.

More reading

• How much do you need in an ISA to earn £19,999 a year on top of the State Pension
• How much is needed in FTSE 100 stocks to make £1,547 in monthly second income?

Rupert Hargreaves owns shares in Landsec. The Motley Fool UK has recommended Carnival and Landsec. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Resilience

Landsec (LSE: LAND), the UK’s largest listed commercial property company, is no exception — its shares trade at 35% discount to its adjusted dilute net asset value of 1,403p per share. And that’s in spite of the underlying resilience of its investment portfolio and strong leasing activity in recent months.

Adjusted diluted earnings per share, a measure of underlying profitability, increased from 48.3p last year, to 53.1p, on the back of the completion of new developments and a reduction of interest costs. The company even managed a 14.7% boost to its full-year dividend to 44.2p, giving its shares a yield of 4.8%.

Valuation movement

Investors were perhaps more concerned about the 1% decline in its net asset value for the year. The value of its investment portfolio fell by 0.7%, giving Landsec a valuation deficit for the year of £91m.

However, the net asset value decline also reflected the refinancing of £1.5bn worth of legacy debts. This was a case of short-term pain for long-term gain, as it lowered its weighted average cost of debt to 2.6%, from 4.2% last year.

Retail sector

Also offering investment potential within the sector is Hammerson (LSE: HMSO). The retail-focused REIT, which recently dropped its plans to buy rival shopping centre owner Intu Properties (LSE: INTU), is reshaping its strategy in an attempt to unlock value for shareholders.

Hammerson’s bid to buy Intu failed as it was unable to garner significant shareholder support amid fears of the heightened risks of the proposed merger. Now, the company could itself be looking at further asset disposals as it seeks greater exposure to higher-growth segments of the retail market and assesses the potential for greater cash returns to shareholders.

It has so far announced plans to exit the retail park sector over the medium-term and initiated a £300m share buyback programme. With shares currently trading at a 37% discount to net asset value of 776p per share, there’s significant potential upside from a re-rating of its shares as the company repositions its property portfolio.

Intu

Unsurprisingly, Intu’s shares have fared even worse following the aborted takeover by Hammerson. Shares in the company trade at a 56% discount to net asset value of 362p per share, reflecting concerns about the group’s high leverage and falling property valuations.

In the six months of 2018, Intu took a massive £650m property revaluation hit, as the market value of its investment properties dropped from £10.5bn, to £9.8bn. Aside from the obvious impact to net asset value, which fell by 12% over the period — more worryingly, the valuation deficit also inflated its debt to assets ratio to 48.7%.

If property valuations continue to trend downwards, Intu, which already has an above-average financial gearing in the sector, could be forced to raise equity or cut dividends to prevent its loan-to-value ratio from exceeding 60%.

Intu’s shares are currently one of the highest-yielding in the REIT sector, with a yield of 8.8%.

The post Income investors: 3 embarrassingly cheap REITs with yields of up to 8.8% appeared first on The Twelfth Magpie.

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Jack Tang has positions in Landsec and Hammerson. The Motley Fool UK has recommended Landsec. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.