Finding a generous dividend yield inside a stock that’s already fallen by nearly half sounds like the perfect set up for a yield trap. But not always.
UNITE Group (LSE:UTG) is the UK’s largest provider of purpose-built student accommodation. And since April 2025, its shares have tumbled a stomach-churning 46.5%, dragging the stock back to levels not seen since late 2014.
The result is a payout of around 8.1% a year. But is this secretly a rare buying opportunity, or is it a warning trying to tell investors something important?
Digging deeper into UNITE’s ops
UNITE Group’s the UK’s dominant provider of purpose-built student accommodation (PBSA) and owns over 70,000 beds across university cities nationwide.
Unlike typical landlords, UNITE forms long-term partnerships directly with universities, securing reliable demand from some of the most academically prestigious institutions in the country.
Since the business is structured as a real estate investment trust (REIT), almost all of this rental income is returned to shareholders through chunky dividends. And this highly cash-generative business is precisely what makes the high yield even more compelling.
But if that’s the case, how come the shares are now at their lowest level in over a decade?
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Why have the shares fallen so hard?
Quite a few forces have collided to create this sell-off. First, the UK government’s tightening of international student visa policy has meaningfully softened demand from overseas students. That’s important to highlight since these students have historically been some of the biggest premium-paying tenants and are a key driver of both occupancy and rental rates.
The second factor is UNITE’s recent acquisition of Empiric Student Property, which has suffered quite a bit of unexpected turbulence.
Integration difficulties have led to lower occupancy and shorter tenancies. To make matters worse, management’s warned of an expected 10% increase in operating costs . This is driven by Minimum Wage increases and higher Employers’ National Insurance contributions that impact UNITE’s large on-site workforces.
The result? Management slashed its 2026 adjusted EPS guidance range to between 41.5p and 43p. By comparison, earnings in 2025 landed at 47.5p, signalling a potential 12.6% incoming drop.
Is there a buying opportunity here?
There’s no denying that UNITE’s seemingly in a tricky spot of rising expenses and wobbly demand, not all of which was self-inflicted. However, despite the gloom, there’s still a potential opportunity here.
UNITE’s net tangible asset value stands at 955p per share, against a current share price of around 465p. In other words, the company’s trading at an enormous 51% discount compared to its underlying property portfolio.
Management’s seeking to sell £300m-£400m worth of underperforming properties in 2026. But the discount remains substantial even after factoring in these future asset sales.
At the same time, reservation rates for the 2026/27 academic year have reached 74%. This is in line with internal expectations, suggesting that the business may have started to stabilise.
There’s no denying that UNITE still has a long list of challenges and uncertainties to overcome. But for patient investors prepared to hold through the turbulence, there’s an 8.1% dividend yield on offer with a near 50% margin of safety right now. And that’s why I’m planning to take a much closer look.
