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2 beaten-down FTSE 100 stocks I’d buy right now

Shopping centre owner Intu Properties (LSE: INTU) found itself being relegated from London’s premier league FTSE 100 index earlier this year as a result of increased investor pessimism over the retail sector. But after shedding around a fifth of its value in just 12 months, could it be time for contrarians to step in and be greedy when others are fearful?

The £2.8bn property giant which owns many of the UK’s largest and most popular retail destinations, including Lakeside in Essex, Cribbs Causeway, and Manchester’s Arndale and Trafford Centre, has seen its share price in steady decline since early 2015, when it was trading as high as 376p. Today the shares can be picked up at a heavily discounted price of around 200p per share.

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Protection from the taxman

For the past 10 years Intu has operated as a real estate investment trust (REIT) which means it enjoys a measure of protection from corporation tax in return for an obligation to distribute a significant amount of cash flows to shareholders.

As a REIT, Intu doesn’t pay UK direct taxes on the income and capital gains from its qualifying UK property rental business, with one requirement of this regime being that it must distribute at least 90% of taxable profits from the rental business to shareholders each year. That’s great news for dividend chasers.

The share price slump means that Intu is now trading on a much lower earnings multiple than in recent years at 15, and also supports a much higher dividend yield of 6.4%. If the shareholder payouts can be maintained, this alone should be enough to protect the share price from further falls.

Rising tide of pessimism

Still managing to hold on to its blue-chip status, but only just, is property peer Hammerson (LSE: HMSO). Like Intu, Hammerson has also had to deal with the rising tide of pessimism, with its shares falling to 525p, from highs of over 705p less than three years ago.

The London-headquartered property group also has a retail-focused portfolio that includes investments in 23 prime shopping centres in the UK, Ireland and France, as well as 17 retail parks in the UK, and 20 premium outlets across Europe. Despite the doom and gloom that surrounds the retail sector at the moment, our friends in the City still expect Hammerson to eke out annual mid-single-digit earnings growth in each of the next two years, which is certainly better than the company’s current share price would suggest.

Like Intu, Hammerson operates as a Real Estate Investment Trust (REIT) and distributes a generous chunk of its profits as dividends, which currently provide its shareholders with a solid yield of around 5%. Hammerson’s shares currently trade on a price-to-earnings multiple of 17, which although not cheap by conventional metrics, is much lower than its most recent five-year range of 20-25.

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Bilaal Mohamed has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.