That means that if I was renting out my house, I’d have lost about 35% of my annual rental income on just that one repair.

I think property investing is like stock market investing. To generate a reliable income, you need a portfolio. Building a property portfolio is out of my reach. But investing in portfolios of high quality property through the stock market is easy and affordable. So that’s what I’ve done.

London focus

One lesson from previous market crashes is that good quality London property tends to be more resilient than anywhere else. This is why one of my top picks for property income would be Landsec (LSE: LAND), the FTSE 100 real estate investment trust formerly known as Land Securities.

Landsec does still own retail property outside London. But this side of its business is being scaled back. According to chief executive Robert Noel, 65% of the firm’s assets by value are in London, and all of its development projects are in the capital.

This strategy hasn’t stopped investors ditching the stock over fears about the future profitability of Landsec’s £2.5bn portfolio of shopping centres. The value of this property fell by 11.7% last year and Mr Noel expects further declines.

Retail exposure is a risk. But Landsec has more than £6.5bn of prime London property to help offset this risk. There’s also a lot of bad news already priced into the stock, which trades at a 37% discount to its net asset value of 1,341p per share.

I’d buy

Landsec has kept debt levels low and has already sold off much of its lower-quality retail property. The firm’s portfolio produced a rental income of £618m last year, 7% higher than the previous year.

For shareholders, a period of uncertainty seems inevitable. But I expect rental income to remain fairly stable. This should support the dividend, which is expected to yield 5.6% this year. I see this as a good entry point for investors wanting a long-term passive income.

Industrial focus

One area where Landsec has no exposure is industrial property. The market for modern warehouse space is booming and there are now a number of REITS specialising in this area.

However, my top pick in this sector is a smaller player, Hansteen Holdings (LSE: HSTN). Hansteen has a market cap of about £400m and owns a portfolio of urban distribution and light industrial properties around the UK.

The company focuses on properties serving local areas rather than the so-called big box logistics properties that are currently attracting premium valuations.

Joint chief executives Morgan Jones and Ian Watson have a track record of good market timing in this sector. They’ve also shown caution and discipline in the face of rising prices, selling some property and returning cash to shareholders.

Together, Mr Jones and Mr Watson own 5.6% — about £22m — of Hansteen stock. This suggests to me that their interests are well-aligned with those of shareholders like me.

At about 92p, HSTN shares trade at a discount of about 10% to their book value and offer a forecast yield of 5.5%. I may buy more over the coming months.

The post Forget buy-to-let! I’d generate a passive income from this FTSE 100 property stock appeared first on The Twelfth Magpie.

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Roland Head owns shares of Hansteen Holdings. The Motley Fool UK has recommended Hansteen Holdings 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.

That’s put pressure on buy-to-let landlords’ profits, which rely on capital gains from property sales and rental income that’s high enough to cover ownership costs.

Falling returns

Rental yields in London now average just 5.4%, according to Hamptons. In the North East, where yields are highest, the figure is 8.7%.

Those numbers may seem attractive. But rental yield — which compares rent to a property’s purchase price — is calculated before costs such as maintenance, insurance, mortgage interest and void periods. Most landlords’ net yield, after costs and tax, will be much lower.

By contrast, a number of good quality FTSE 100 property stocks offer comparable dividend yields that can be received tax-free and with no costs if the shares are held in a stocks and shares ISA. This is where I’d put my money today.

Owning a slice of London

Rather than paying peak prices for houses, I think it makes more sense to buy property when it’s out of favour and prices have fallen. That’s certainly the case at FTSE 100 retail and office landlord Landsec (LSE: LAND), which released full-year results today.

The value of Landsec’s portfolio fell by 4.1% to £13,750m last year. This was mainly driven by an 11.7% fall in the value of the group’s £2,493m portfolio of shopping centres, which includes part ownership of Bluewater in Kent.

However, the value of Landsec’s £5,266m portfolio of London offices was almost unchanged, while leisure and hotel properties also held up well.

Retail property may have further to fall. But investors buying Landsec shares don’t have to pay the asking price. At about 890p, the stock trades at a discount of more than 30% to its net asset value of 1,339p per share. That looks like a comfortable margin of safety to me.

Landsec plans to focus on the London market for future developments. Over the long term, I expect this to be a profitable strategy. In the meantime, the shares offer a cash dividend yield of 5.1%. In my view, this is a stock to buy and tuck away for income.

Another way to play London housing

I’m staying with London for my second pick today. Berkeley Group Holdings (LSE: BKG) is a well-known housebuilder that’s chaired by founder Tony Pidgley.

Mr Pidgley has an enviable record of timing the market well and spotting cycles early. Berkeley called the top in London property some time ago and is now starting to invest in “the next wave of regeneration sites”.

Profits are expected to fall in 2019/20. But the firm’s clear guidance on profits means that this news should already be factored into the share price.

The group reported net cash of £859.7m at the end of October and expects to return £280m to shareholders each year until 2025. That’s about 217p per share. Some of this is expected to be used for share buybacks, with the rest spent on dividends.

Analysts expect Berkeley to pay a dividend of 203p per share for the current year, giving a forecast yield of 5.5%. For investors with a long-term view, I’d rate Berkeley as a good way to profit from London housing.

The post Buy-to-let is dying. I’d buy these FTSE 100 property stocks appeared first on The Twelfth Magpie.

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Roland Head 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.

By contrast, the FTSE 100 has a dividend yield of around 4%. However, it is possible to generate a higher yield which may rise with inflation over the long run. With that in mind, here are two FTSE 100 stocks that offer 5%+ dividend yields, as well as capital growth potential.

United Utilities

Despite the political uncertainty facing the UK at the present time, the United Utilities (LSE: UU) share price has risen sharply in recent months. In fact, it is up by 13% since the turn of the year, with investors becoming increasingly optimistic about a variety of companies that are focused on the UK.

Even though it has risen sharply of late, United Utilities still has a dividend yield of just over 5%. It has a solid track record of dividend growth, and could increase its future payments by at least as much as inflation.

Although there are risks from a potential nationalisation of the wider water services sector should there be a change in government, United Utilities seems to offer a wide margin of safety at the present time. Its price-to-earnings (P/E) ratio of 14.7 is relatively modest compared to its historic levels, and could indicate that there is a value investing opportunity on offer over the long term.

Landsec

The commercial property sector has faced a difficult period over the last couple of years, with shares in stocks such as Landsec (LSE: LAND) coming under pressure. Even though it has gained 16% since the start of 2019, it still trades on a price-to-book (P/B) ratio of 0.7. This suggests that it offers excellent value for money, since it could rise by 50% and still only trade at net asset value.

Clearly, there is scope for a fall in commercial property prices in London and across the UK. Brexit risks may not feel as pressing as they did a few weeks ago. However, there remains a deadline for later this year when talks need to be finalised, and this may mean that investment in the property sector remains at a low level throughout 2019.

With Landsec having a dividend yield of 5.3%, it could deliver an impressive total return even over the short run. Since the commercial property industry moves in cycles, now could be a good time to buy into it while it trades at a low ebb. While potentially risky depending on how the UK economy performs, the company appears to have a solid asset base, a sound strategy and a wide margin of safety which together may drive its share price higher.

The post Forget a Cash ISA. I’d buy these 5%+ yielding FTSE 100 dividend stocks today appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of 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.

I also want to consider another FTSE 100 property firm whose rapid growth has made it the UK’s largest Real Estate Investment Trust (REIT).

Are we near the top?

Warehouse property specialist Segro (LSE: SGRO) has played a blinder by focusing on providing the large logistics properties needed by fast-growing online retailers. Segro’s share price has doubled in the last five years, during a period when many listed property stocks have flatlined, or fallen.

However, trees don’t grow to the sky. This booming market must slow at some point. News from Segro this week suggests to me that this time is approaching. The value of new leases signed during the first quarter was £21.2m, 22% lower than during the same period last year.

Although chief executive David Sleath says that although political risks are a concern, he’s confident of continued growth. But after raising £451m from shareholders to fund new opportunities in February, he’s decided to spend about £270m repaying some of the firm’s debt a year early.

The firm may simply be planning to refinance this debt at lower cost. But it may also be a proactive move by Sleath to reduce Segro’s gearing, ahead of a possible slowdown in growth.

I don’t like the price

In either case, Segro shares currently trade at a premium to their book value of 650p per share, and offer a dividend yield of just 2.9%. In my view, this isn’t an attractive entry point for a long-term property investment. I think the shares look fully-priced and could be heading for a retreat. I’d prefer to invest in a company that’s currently out of favour, despite having high-quality assets and a generous dividend yield.

A rare opportunity?

One of my top picks in the property sector is Landsec (LSE: LAND), the FTSE 100 REIT previously known as Land Securities. This group owns a large portfolio of prime London office space, along with major shopping centres and retail parks across the UK.

Although retail is out of favour at the moment and rents are falling, Landsec’s centres are major destinations with a good mix of tenants. The firm also has a growing number of leisure tenants, such as bowling alleys and cinemas. Demand remains strong for such activities.

Landsec’s share price has fallen by more than 30% from the highs seen in 2015, leaving the stock trading at a 34% discount to its book value.

It’s worth remembering that although Landsec did cut its dividend during the financial crisis, the firm maintained a payout. It also has an unbroken record of dividends stretching back to at least 1992, the earliest date for which I could find records.

In my view, this dividend stalwart is hard to fault. At about 910p, Landsec shares offer a forecast dividend yield of 5.1%. To me, this contrarian buy looks a much better option than chasing the tail end of the warehouse boom.

The post 1 FTSE 100 5% dividend stock I’d buy for my ISA today appeared first on The Twelfth Magpie.

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Roland Head 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.

Empty units are a common sight on many high streets, but Landsec’s pitch to investors is that the quality of its prime retail space means retailers will continue to demand space.

So far, the firm seems to have been right. During the first half of this year, the group’s revenue rose by 10.3% to £224m, while pre-tax profit rose by 23% to £42m.

Adjusted earnings rose by 17.9% to 30.3p per share during the six-month period, while the interim dividend will increase by 14.7% to 22.6p per share.

The only performance metric that didn’t rise was the valuation of the group’s properties, which fell by £188m or 1.4%. This reduced the group’s net asset value to 1,385p per share.

The modest fall masked a larger drop in the value of the group’s retail property. The value of Landsec’s retail parks fell by 4.5%, while shopping centres were down 3.2%. Even Central London shops got hit, losing 2.7% of their value.

The only properties that rose in value were the firm’s London office blocks.

Is it too soon to buy?

At pixel time, Landsec shares were trading at about 860p. That means the stock is priced at a 37% discount to book value. When a good quality property stock like this trades at a big discount to book value, it’s often a buying opportunity.

The problem here is that many investors — including me — think that the value of Landsec’s retail property is likely to keep falling. Although the 5.4% dividend yield looks safe enough to me, I don’t see any rush to buy the shares at the moment. I plan to wait a little longer before making a decision.

One stock I’m watching closely

One company that is on my shopping list is FTSE 100 advertising group WPP (LSE: WPP).

The marketing giant’s shares fell by 15% at the end of October after new boss Mark Read issued a downbeat third-quarter trading statement. WPP stock has now fallen by about 35% so far this year, but I’m starting to think that there might be some value on offer.

Ad spending may be shifting online, but there’s still a need for skilled marketers to develop and run ad campaigns. Managing the data that’s used in online marketing is also a complex activity requiring specialist skills.

Although my previous call on this stock was too soon, I remain convinced that there’s a lot of value in the sprawling empire created by Sir Martin Sorrell.

I’m very tempted

Profit forecasts for the current year have been cut by 17% over the last 12 months. Earnings are also expected to edge lower next year. However, I think that much of this bad news is already reflected in WPP’s share price.

The group’s stock now trades on just 7.9 times 2018 forecast earnings, with a dividend yield of 7%. Having crunched the numbers, I think the shares could offer good value. I’d rate WPP as a contrarian buy.

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Roland Head 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.

However, today may eventually be viewed as a stunning opportunity to buy property stocks for future years. Valuations are low, financial performance remains robust and this could mean the risk/reward ratios on offer are compelling. With that in mind, here are two property stocks that could be worth buying right now.

Improving performance

Reporting on Tuesday was Real Estate Investors (LSE: RLE). It is a real estate investment trust (REIT) which is focused on the West Midlands commercial property market. Its pre-tax profit for the 2017 financial year increased by 37.8%, with a record underlying profit before tax of £6.2m. Its property assets grew in value to £213.1m, which is a gain of 5.5%. This has allowed the company to increase dividends for the fifth year in a row, with them up by 19% during the year.

Looking ahead, the uncertainty present in the property market provides the company with the opportunity to buy discounted assets. It has also been able to make strategic sales and remains confident in its long-term outlook.

With Real Estate Investors trading on a price-to-book (P/B) ratio of 0.7, it seems to offer excellent value for money. While relatively small and lacking in regional diversification, the stock has a wide margin of safety. This suggests that even if the wider economy experiences a downturn, its valuation may have already factored-in more difficult trading conditions. As such, it could be worth buying at the present time.

Solid performance

Also offering investment potential within the REIT sector is Land Securities (LSE: LAND). As one of the largest operators in the sector, it offers a considerable degree of diversity and a strong balance sheet. This could help it to perform relatively well in what may prove to be a challenging era for the economy.

In previous years, the company has been able to generate solid performance. Its earnings have risen in each of the last four years and are due to do likewise in the next two. This could help to boost the company’s income prospects, with it expected to yield almost 5% in the next financial year.

With an envious portfolio of assets and a strategy which seems to be working well, Land Securities could prove to be a strong buy for the long term. As with many of its sector peers, it could offer a volatile share price in the short run. But with a P/B ratio of just 0.6, it appears to be in ‘bargain territory’ and could be worth buying now for the long run.

The post Looking to invest £1,000? Here are two cheap investment trusts I’d consider appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Land Securities Group. The Motley Fool UK has recommended Land Securities Group. 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.

Despite this, investing in commercial property through real estate investment trusts (REITs) could be a shrewd move. In the case of these two REITs, their valuations appear to factor in the risks they may face. As such, now could be the perfect time to buy them for the long run.

Improving outlook

Reporting on Tuesday was Shaftesbury (LSE: SHB). The company owns a 14.5 acre property portfolio in London’s West End which is among the most highly-valued sections of real estate in the UK. In the past, it has been able to weather economic woes relatively well. And while the UK economy is experiencing some disruption at the moment, the company appears to be performing as expected.

For example, it stated in its full-year results that occupier demand remains healthy, with typical-sized space letting well. The strong performance of the company can further be seen in its 8.8% increase in dividends. Additional growth could be ahead, with earnings growth of 15.7% reflecting the continuing delivery of the company’s strategy. And with 46% of completed space among its three larger schemes now let or under offer, it seems to be performing well.

With a price-to-book (P/B) ratio of 1.05, Shaftesbury appears to be relatively cheap at the present time. Certainly, there could some uncertainty ahead in the wider commercial property market. But with a strong asset base and low valuation, the company appears to offer impressive investment prospects.

Low valuation

Also offering an upbeat outlook at the present time is sector peer Land Securities (LSE: LAND). It also has significant exposure to the London commercial property market. However, it combines this with exposure to a range of assets across the UK, including shopping centres and other leisure assets. Therefore, it may offer a degree of diversity at a time when property prices across the UK are moving at different speeds and in some cases in different directions.

With Land Securities trading on a P/B ratio of 0.6, it appears to offer an exceptionally wide margin of safety. This could signify that there is considerable upside potential on offer for the long run. As well as this, it has a dividend yield of 4.4%. That’s considerably higher than the rate of inflation and with earnings growth due to be positive in both the current year and next year, the pace of dividend growth could be relatively high.

Although buying shares in relatively unpopular stocks can be challenging in the short run and may lead to paper losses, Land Securities could prove to be a strong investment opportunity for the long run.

The post 2 bargain investment trusts I’d buy and hold for 25 years appeared first on The Twelfth Magpie.

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Peter Stephens owns shares in Land Securities. The Motley Fool UK has recommended Land Securities Group. 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.

What’s more, there are many listed real estate investment trusts (REITs) trading at steep discounts to their book values, meaning investors can get a slice of the commercial property market on the cheap.

Defensively positioned

Landsec (LSE: LAND) today reported a 5.2% hike in underlying profit in its first-half, following high levels of leasing activity and healthy rental contribution of recent acquisitions and newly completed developments.

The company, formerly known as Land Securities, has a good track record of developing and managing its assets. But looking ahead, it warned about the impact of Brexit headwinds on the economy. Rental values have already weakened slightly in the London office market, and worse may still be to come.

But despite the uncertain macro backdrop, the company is seeing only a slight uptick in its vacancy rate — it rose by just 0.1 percentage points to a still-low 2.9% in the first half of 2017. And going forward, the group is defensively positioned, as demand for higher-value properties has historically been resilient throughout the cycles. 

The balance sheet is in good shape too, with a loan-to-value (LTV) ratio of just 25.1%. What’s more, thanks to its recent refinancing efforts, the group has an average debt maturity of 15.1 years, with fixed interest rates determining 97% of its value. This high proportion of fixed interest rate loans and its long-dated maturity structure should help Landsec to reduce near-term exposure to refinancing risk and better withstand future interest rate increases.

As such, I reckon rental income is likely to shine through in the coming year and remain high enough to keep NAV and dividend growth on the positive side. And if you’re looking for another reason, valuations are cheap too — the stock trades at a 35% discount to NAV and yields 4.3%.

Solid earnings growth

Also offering impressive income in the commercial property space is Schroder Real Estate Investment Trust (LSE: SREI).

The REIT’s focus on higher growth locations has paid off as it recently announced an impressive 10.3% increase in its first-half EPRA earnings, a measure of underlying profits which strips out valuation gains. And thanks to its resilience, SREI has been a top-performer in the commercial REIT sector, with shares in the trust up 8% year-to-date.

Looking ahead, the company has an eye on growing its income, by targeting investment in higher-income-producing assets and increasing its exposure to faster growing locations. I reckon these asset management opportunities would help it to sustain its outperformance against its peers.

On the downside, SREI trades at a much smaller discount to its NAV of just 6%. Still, it offers inflation-beating potential, as demand for good quality, well-located assets is likely to hold up well amid ongoing political uncertainty and cyclical risks. The REIT also offers a 4% yield, with dividends covered nearly 1.2 times by underlying rental income. 

The post Why I’d buy Land Securities Group plc for its 4%+ dividend yield appeared first on The Twelfth Magpie.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

The property sector has faced an uncertain period this year. The impact of Brexit on valuations may have been somewhat modest, but investors seem to be unsure about the future prospects for the sector. This has led to a number of property companies having wide margins of safety, which could signal that they offer good value for money. With that in mind, here are two property-focused stocks which appear to be worth buying right now.

Improving performance

Reporting on Friday was property developer and manager Capital & Counties (LSE: CAPC). It reported that its two central London estates have enjoyed an active start to the year. Its Covent Garden estate now represents two-thirds of revenue and has recorded positive rental and value growth. It has also seen operational progress, with 43 leasing transactions signed during the first half of the year.

Similarly, at the company’s Earls Court project, enablement works are on track and it continues to progress plans for the enhanced Masterplan in order to maximise the potential of the land holding. At the company’s Lillie Square asset, it has pre-sold over half of the development and the handover of Phase 1 is on schedule to complete by the end of the year.

Capital & Counties remains optimistic about its future prospects. It has a relatively strong balance sheet and low leverage, as well as high liquidity. This should provide a degree of security should the wider sector experience difficulties brought on by an uncertain outlook for the UK economy following Brexit. And with it having a price-to-book (P/B) ratio of just 0.8, it seems to have a sufficiently wide margin of safety to merit investment at the present time.

Income potential

Also offering upside potential in the property sector is real estate investment trust (REIT), Land Securities (LSE: LAND). It has an enviable asset base, with it including prime real estate in London. This could experience a turbulent period because of Brexit, but in the long run it looks likely to appreciate in value as demand for office and retail space in the capital increases.

Land Securities also offers a wide margin of safety. It trades on a P/B ratio of just 0.7. Given the strength of its asset base, this suggests it is dirt cheap at the present time. That’s especially the case since the company is forecast to post a rise in its bottom line of 6% in the current year, followed by 4% next year.

This growth potential could provide the company with the means to raise dividends in order to boost what is already a relatively enticing yield. Land Securities currently has an income return of almost 4% and since dividends represent around 78% of profit, they appear to be at an affordable level. This mix of income, value and growth potential could make the stock a worthwhile investment despite the uncertainty which the wider property sector currently faces.

The post These 2 property stocks are ridiculously cheap 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?

Peter Stephens owns shares of Land Securities Group. The Motley Fool UK has no position in any of the shares mentioned. 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.

Does this mean it is now officially the best dividend stock in the FTSE 100? Perhaps. But there are some potential alternatives.

FTSE 100 property group Land Securities Group (LSE: LAND) saw its underlying pre-tax profit rise by 5.5% to £382m during the year to 31 March. The group will pay a final dividend of 11.7p, lifting the total payout for the year by 10.1% to 38.55p.

Land Securities’ portfolio has two parts — prime London office and retail space, plus regional shopping centres and retail parks. Brexit hasn’t had much of an impact on the firm yet, but Thursday’s full-year results make it clear that it has made thorough preparations for a potential slowdown.

The group’s loan-to-value ratio is just 22.2%, which is much lower than most peers. Land Securities’ average unexpired lease term is 9.1 years, the longest on record for the firm. Financing is in place to match this. The group’s outstanding debt has an average of 9.4 years until maturity and its average interest rate fell from 4.9% to 4.2% last year.

This all adds up to a very robust picture, in my view. The only potential risk is that vacancy levels across the like-for-like portfolio have increased over the last year, rising from 2.4% to 4.6%. This needs watching, but I think it’s likely to be a short-term concern. Land Securities properties are generally of high quality and in good locations. Historically, demand for such properties — especially in London — usually remains firm over long periods.

It currently trades at a 22% discount to its adjusted net asset value of 1,417p per share, and offers a 3.5% dividend yield. In my opinion, the shares could be a good long-term income buy for UK investors.

Lloyds’ yield is nearly double

It’s true that Lloyds offers a forecast dividend yield of 5.7%, nearly double that of Land Securities. But the bank’s long-term income is dependent on many of the same risk factors as Land Securities.

Just as a recession would hit demand for office and retail space, it would also be likely to affect the credit quality of Lloyds’ mortgage and credit card customers. New borrowing rates would probably fall, and arrears could rise sharply.

It may also be worth noting that while analysts expect Land Securities’ earnings per share to rise by 5% in 2018, Lloyds’ earnings are expected to fall by about 4% next year. The bank’s asset backing isn’t so strong either. Lloyds’ current share price of 71p represents a 25% premium to its tangible net asset value of 56.5p per share. That’s a perfectly reasonable valuation for a healthy, profitable bank, but means the downside protection is limited if earnings slump.

Although Lloyds’ turnaround has been mightily impressive, it remains to be seen whether the bank can now deliver stable earnings and dividend growth over long periods. But my overall view is that both Lloyds and Land Securities are attractive long-term income buys at current levels.

The post Why this FTSE 100 dividend champion could beat Lloyds Banking Group plc appeared first on The Twelfth Magpie.

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Roland Head has no position in any shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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.