Real estate investment trusts, or REITs, continue to offer some fantastic dividend yields in 2026. This sector hasn’t been particularly popular with investors recently, as higher interest rates not only dragged down property values but also increased their often-high debt burdens.
However, like most things, there are always exceptions. And in some cases, investors can lock in some pretty chunky and healthy-looking dividend yields. That’s why I recently topped up my position in LondonMetric Property (LSE:LMP).
In total, I now have 1,267 shares today, generating just over £157 of passive income each year. But now the question is, should I buy more?
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The bull case
As one of the largest commercial landlords on the London Stock Exchange, LondonMetric Property enjoys a recurring and reliable stream of rental income from a diversified portfolio of property types and tenants. This includes logistics hubs, theme parks, healthcare centres, and even convenience stores, among others.
Yet, despite the share price only climbing modestly over the last 12 months, the underlying business has achieved some pretty solid results.
Driven by a combination of organic and acquisitive growth, the firm’s net rental income during the six months ending in September 2025, climbed 14.6% to £221.2m. Property revaluations have also helped bolster the value of its asset portfolio to a record £7.4bn, backed by 98.1% occupancy and an average lease duration of 16.4 years.
Combining this predictable and reliable stream of income with sector-leading cost efficiencies, it’s hard not to be tempted by its impressive 6.3% dividend yield.
What could go wrong?
Despite my optimistic outlook for this enterprise, it’s unwise to ignore the risks. Like many REITs, the balance sheet carries significant volumes of debt.
This was fine when interest rates were near 0%, but that’s obviously not been the case more recently. And with the Bank of England cutting rates at a relatively slow pace, this high level of gearing is applying pressure to profits.
There are also the risks relating to acquisitions. With so many REITs suffering under the burden of their outstanding loans, LondonMetric has been leveraging its size and financial strength to acquire smaller players within the industry.
In many instances, these acquisitions are being executed at a discount compared to a few years ago. And that’s certainly an encouraging sign of value-oriented thinking from management. But acquisitions don’t always pan out.
Should its acquired properties fail to meet performance expectations, the extra income may not ultimately be worth the added debt to the business. Of course, the company does have the option to sell some of its assets if it needs to raise some capital.
But as previously mentioned, higher interest rates impact real estate prices. And therefore, the company may be forced to dispose of certain properties at prices below what they paid – destroying shareholder value in the process.
The bottom line
Like many REITs, LondonMetric Property carries some notable risks. But unlike many, it operates with industry-leading efficiency and the dividend is still covered by earnings.
As interest rates continue to fall, the dividend coverage is on track to improve even further. And that’s why, despite the risks, I’m seriously considering buying even more shares for my passive income portfolio. But it’s not the only income opportunity on my radar right now.
