6.5% yield and a P/E of just 12.3! Is this forgotten income stock now a generational bargain?

Iâve got scope to add another dividend income stock to my portfolio, and Iâm hunting for something a little different.

I already have plenty of exposure to high-yielding financials such as M&G and Phoenix Group Holdings. Theyâve been paying super-generous dividends while delivering solid share price growth. Thatâs great news for me, but investing is cyclical, and after such strong runs their share price momentum may be fading.

So Iâm casting my net wider and looking at a different sector, real estate investment trusts, or REITs. They can be tempting for income seekers because to qualify as a REIT, a company must pay out at least 90% of its qualifying profits as dividends. Capital growth can come on top, although itâs been in short supply for some time. Is that about to change?

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.

Landsec shares struggle

Land Securities Group (LSE: LAND) is one of the UKâs largest commercial property owners and developers, with a diversified portfolio of offices, shopping centres and high-street retail. On paper, it ticks plenty of boxes. In practice, the share price has struggled for much of the past decade. After topping 1,000p around 10 years ago, it trades closer to 620p today.

The real damage was done during the pandemic, when lockdown crushed retail footfall and working from home hammered office demand. Rising inflation and interest rates then delivered another blow, pushing up the cost of capital, denting earnings from property disposals, and leaving consumers feeling poorer.

Yet despite all this, underlying rental income has held up reasonably well. Occupancy stands at a robust 97.7%, while rental income rose 5.6% in the six months to 30 September.

Profits slump on disposals

That said, profits have taken a hit. Latest pre-tax profit slumped from Â£243m to Â£98m, largely due to a Â£67m loss on Â£644m of property sales that generated little or no return. The board is now reshaping the portfolio towards higher-quality assets, but that means enduring some short-term pain.

Landsec is also branching out into residential property. That sector has struggled too, judging by the performance of housebuilders, but falling interest and mortgage rates, combined with Britainâs chronic housing shortage, could elevate the outlook.

Iâm not alone in feeling slightly more upbeat, with the shares up 6.5% over the past year. This looks like the early stage of a potential recovery, but the shares still look good value. The price-to-earnings ratio sits at just 12.3, while the price-to-book ratio is a modest 0.7. Although given recent share price performance, Landsec has plenty to be modest about.

Investors will also be wary of net debt of Â£4.4bn, which sits only just below the companyâs market value of Â£4.6bn.

The dividend is harder to ignore with a chunky trailing yield of 6.5%. The Landsec share price could recover alongside the wider economy, but while thereâs potential value here, I’m struggling to argue this is the kind of mispricing that comes along only once in a generation. I’m sticking with my income-paying financial stocks.

The post 6.5% yield and a P/E of just 12.3! Is this forgotten income stock now a generational bargain? appeared first on The Motley Fool UK.

Should you invest Â£1,000 in Land Securities Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

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?

See The Six Stocks

More reading

Harvey Jones has positions in M&g Plc and Phoenix Group Plc. The Motley Fool UK has recommended Land Securities Group Plc and M&g Plc. 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.