Could FTSE 100 incumbent Land Securities (LSE:LAND) be a good addition to my portfolio? The real estate sector has been affected since the pandemic but signs of recovery have made me consider adding shares in Landsec.
FTSE 100 REIT
Land Securities Group, often referred to as Landsec, is one of the largest real estate investment trusts (REIT) in the UK. It specialises in retail, leisure, workspace, and residential buildings. Some of its well known sites include Piccadilly Lights in the West End of London, Westgate Oxford, and Trinity Leeds. At the time of writing, Landsec’s portfolio is worth £11bn and spans 23m square feet.
A REIT is a firm that owns, operates, or finances income-generating real estate. It offers individual investors the opportunity to earn dividends from real estate investments without having to buy or manage these properties themselves.
As I write, shares in Landsec are trading for 756p. A year ago, shares were trading for 693p, which is a 9% return. Shares in Landsec have not reached pre-crash levels of over 900p.
For and against
FOR – Landsec recently released half-year results. These results have led me to believe a recovery is ongoing for the real estate sector and Landsec itself. Profit before tax was up to £275m compared to a huge loss in the same period last year. Landsec also disposed of £250m of assets but progressed to £616m worth of acquisitions for growth plans, which is pleasing to see. The recent e-commerce boom will help REITs in supplying increasing demand for commercial properties.
AGAINST – Current macroeconomic issues could affect any payout to investors. Rising interest rates will increase the cost of the Landsec’s current debt levels. This is a worry as REITs are popular investments for a passive income. If payouts are reduced, investor sentiment could be affected affecting growth too.
FOR – REITs are seen as a surefire way to make a passive income. Landsec has an enviable portfolio of property throughout the UK and its large footprint and experience can often protect it against market challenges, in my opinion. The half-year results announced an interim dividend of 15.5p per share, up from the same period last year, which is encouraging. Its dividend yield stands at close to 5%, which is higher than the FTSE 100 average of 3%.
AGAINST – When the pandemic struck, Landsec and other REITs saw issues with rent collection and new business wins as well as growth. If further restrictions were to come into force, this could affect the current recovery progress I believe it is making. Rent collection and lack of growth on new projects would affect financials as well as any dividend payouts.
My verdict
Overall I do like Landsec as a passive income provider for my portfolio. It has an excellent portfolio, experience, and a track record of success. It is showing signs of recovery since reopening began. I would add shares to my portfolio to make me a passive income but I would also keep an eye on developments that could hamper progress, such as macroeconomic pressures and any potential pandemic-related issues such as new restrictions.
Jabran Khan has no position in any 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.
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