Why I’d sell this FTSE 100 company ahead of its interim results

Why this Fool is advising extreme caution before investing in this FTSE 100 (INDEXFTSE: UKX) company.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

How often have you heard investors waxing lyrical about the benefits of investing in bricks and mortar? In truth, I have also been guilty in the past of such unquestioning belief. However, this faith has been shaken in recent years following the poor performance of some property companies. One such company is Land Securities (LSE: LAND), which has seen a plunging share price matched by falling asset values.

On the 1st of May this year, prior to the release of Land Securities’ annual report, the share price stood at 920p. At time of writing, despite an increase in the dividend, the shares have fallen to 826p. This represents about a 10% drop in only 7 weeks, which is hardly a ringing endorsement of the company’s future prospects by Mr. Market.

What’s causing the fall?

Broadly, Landsec’s portfolio of properties encompass retail, leisure, office and residential. With the exception of residential, all of these sectors are under exceptionally intense pressure.

Undoubtedly, Landsec’s retail segment is suffering the most due to the success of e-commerce sites such as Amazon. In addition to Amazon, there are a variety of new companies chipping away at markets traditionally supplied by “bricks and mortar” retailers. Witness the booming profits of the British online fashion retailer Boohoo compared to sliding earnings at former giants of fashion such as Arcadia and Ted Baker.

Even big ticket items such as furniture are not escaping the steady forward march of web sales. Nowadays, a relatively new American company, Wayfair, offers buyers the opportunity to purchase all manner of household goods at low cost via its website.

The result of the slump in the popularity of big name retailers was laid bare in the annual results released by Landsec in May. Revealed was a sizeable loss brought about by the demise of such companies as Homebase and Poundworld. Further pain is expected as a consequence of the well-publicized tribulations at Arcadia and Debenhams. If these losses were not bad enough, Landsec’s retail portfolio also experienced a sharp drop in value.

I imagine everyone on the planet is by now aware that the UK is leaving the European Union. Since the announcement, there has been an unfaltering stream of news indicating the repercussions for the office sector of this divorce. Regular reports have appeared telegraphing the intensions of the behemoths of banking and insurance that they will expand their offerings on mainland Europe and downsize their London operations. I think it’s fair to assume that Brexit is a negative development for Landsec.

An indicator of further trouble comes from the unlikely source of the annual reports of one of the world’s biggest hotel groups, InterContinental Hotels Group. Despite rising revenue, there has been a marked decline in gross profits as the hotelier struggles to compete with Airbnb and others. This is certainly a nasty omen for the hotel segment of Landsec’s stable of assets.

To sum up

Current trends do not herald a reverse of fortunes any time soon for Landsec’s share price. Thus, I advocate wariness to investors considering Landsec for its attractive dividend of 5.8% – there are plenty of alternatives for a safer dividend out there.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Bryan Williams has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group, InterContinental Hotels Group, Landsec, and Ted Baker. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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.

More on Investing Articles

Two business people sitting at cafe working on new project using laptop. Young businesswoman taking notes and businessman working on laptop computer.
Investing Articles

After crashing 40% in a year, is this a bargain basement value stock?

This once-beloved growth stock has fallen from grace as its sales momentum stalls, but after multiple price crashes, is it…

Read more »

Shot of an young mixed-race woman using her cellphone while out cycling through the city
Investing Articles

Simple truths about starting an ISA

Dr James Fox explains how investors can open a Stocks and Shares ISA and aim for long-term wealth generation. Getting…

Read more »

A senior man and his wife holding hands walking up a hill on a footpath looking away from the camera at the view. The fishing village of Polperro is behind them.
Investing Articles

Here’s how I’m using my ISAs to target retirement riches

A comfortable retirement's on my mind and I'm using my ISAs to help me get there. But while my cash…

Read more »

Businessman with tablet, waiting at the train station platform
Investing Articles

134,000 reasons why I prefer FTSE 100 stocks over cash savings!

The results are in! Investing in FTSE 100 stocks can be a superior way to build wealth than saving, as…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Here’s how long it’s taken £1k of Nvidia stock to turn into £10k today!

Our writer explains how money invested in Nvidia stock less than three years ago has grown in value over tenfold…

Read more »

Thoughtful man using his phone while riding on a train and looking through the window
US Stock

3 red flags I’m seeing right now for the S&P 500

Jon Smith points out some concerns he has with the S&P 500 at current levels and picks one stock he's…

Read more »

UK financial background: share prices and stock graph overlaid on an image of the Union Jack
Investing Articles

UK dividend shares are outperforming US tech stocks!

UK dividend shares aren’t just for passive income investors. Over the last 12 months, they’ve been outperforming their US tech…

Read more »

DIVIDEND YIELD text written on a notebook with chart
US Stock

Here’s how much passive income an investor could make with £2k in Meta stock

Jon Smith looks at Meta stock from a different angle to normal, considering it as an option for an investor's…

Read more »