I’m searching for the best FTSE 100 dividend stocks to buy at the start of 2025. Here are two I wouldn’t touch with a bargepole next month.
Land Securities
2024’s been a poor year for Land Securities (LSE:LAND). Like other real estate investment trusts (REITs), its share price has slumped as investor hopes over swingeing interest rate rises in the new year have declined.
This poses a significant risks for property stocks, by keeping net asset values (NAVs) depressed and inflating borrowing costs. It’s a particular problem for Landsec given its high net debt (which was £3.6bn as of September).
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At the same time however, the Footsie firm’s enormous forward dividend yield has caught my eye. At 7.1%, this is one of the largest on the UK blue-chip index.
REITs like this are often top stocks to buy for a large and growing income. Sector rules state at least 90% of yearly rental profits must be distributed by way of dividends.
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Yet Landsec’s a share I wouldn’t touch with a bargepole. As well as interest-rate-related headwinds, earnings could remain under strain as the UK economy struggles to grow.
My biggest fear, however, relates to the structural decline of the retail industry. More that a third of the firm’s portfolio comprises of retail assets like shopping centres.
The rise of online shopping, combined with rising costs and escalating business rates, mean another tough year’s in store for physical retail. The Centre for Retail Research (CRR) thinks another 200,000 retailers could close in 2025 alone, resulting in more empty lots for property owners to contend with.
I like the firm’s growing focus on mixed-use urban developments. This could prove profitable over the long term as peoples’ lifestyles steadily evolve. But on balance, the firm offers too much risk for my liking.
Lloyds Bank
Lloyds (LSE:LLOY) is another high-yielding dividend stock I’m keen to avoid in 2025.
On the plus side, I think the FTSE share’s currently in good shape to continue paying market-beating dividends. Payout forecasts for next year yield 6.3%, and are protected by the bank’s robust CET1 capital ratio of 14.3%.
But Lloyds faces a blend of headwinds that could keep it share price under pressure in 2025. For one, the UK economy seems to be entering a fresh downturn that could damage loan growth and push up credit impairments.
On top of this, net interest margins (NIMs) — which slipped to a thin 2.94% as of September — might remain in a tailspin if (as expected) interest rates fall further.
Finally, fears over huge financial penalties could rise as a fresh Financial Conduct Authority (FCA) investigation rolls on. The current probe — which relates to the potential mis-selling of car finance — could end up costing the Black Horse Bank many billions, according to analysts.
I’m not bothered by the boost that a recovering housing market could provide the bank. With so many high-yield UK shares to choose from, I’m happy to leave Lloyds and Landsec shares on the shelf.
