The stock market crash has left plenty of British blue-chips looking quite tasty at current prices. Barclays (LSE: BARC) is one which appears rather appetising from a dividend perspective. The FTSE 100 firm carries an eye-popping 8.9% dividend yield at current prices.
Hold your horses though. The bank’s not a big-cap I’d be prepared to park in my own Stocks & Shares ISA. In fact, I fear it has all the hallmarks of a classic dividend trap.
Will dividends be diced?
In a recent piece about Lloyds I explained why a worsening UK economy could force the company to axe its progressive dividend policy. As things stand though, the banking giant may not have a choice in the matter as the damage caused by the coronavirus outbreak worsens.
Speaking to the Financial Times, Agustín Carstens, head of the Bank for International Settlements (BIS), just called for “a global freeze on bank dividends and share buybacks” in response to the economic upheaval caused by the coronavirus. He called on “central bank interventions” to keep the flow of money alive and for banks to use their “accumulated balance sheet buffers” to battle the crisis too.
So ignore that monster dividend yield I say. Not even this or a rock-bottom forward price-to-earnings (P/E) ratio of 6.1 times are enough to encourage me to invest. The Barclays share price has collapsed 48% since the stock market crash began in mid-to-late February. There’s clearly plenty of reason to expect more weakness in the days and weeks ahead.
A better income pick?
I don’t fancy grabbing a slice of Land Securities Group (LSE: LAND) for my ISA before that upcoming 4 April deadline either. This is the final date stock investors have to max out their £20k allowance for the 2019/2020 tax year.
I’ve long been fearful over the long-term earnings outlook of LandSec, an owner and operator of large retail spaces. The relentless growth of e-commerce was one reason. Crushed consumer confidence amid Brexit uncertainty represented another. It’s the emergence of Covid-19 and subsequent social distancing measures that represent the biggest problems for this Footsie firm.
It’s a point perfectly highlighted by industry rival Hammerson on Monday. It said it had failed to collect a whopping two-thirds of its quarterly rents as its retail tenants pulled their shutters down and struggled for survival.
LandSec is mega cheap right now. It carries a forward P/E multiple of just 9.7 times. Income chasers can toast a monster 8.3% yield too. Still, it’s a share I’m not happy to gamble my hard-earned money on. A terrible trading outlook and rising net debt (almost £4bn as of September) makes it one to avoid at all costs. It’s lost 44% of its value since 20 February and I fully expect it to continue declining.
