The Motley Fool

Warning! A FTSE 100 dividend stock I won’t touch with a bargepole

With inflation back on the rise, it can be tempting for us investors to put the dividend yield above everything else with increasing appetite.

As I explained fairly recently, however, such a strategy is a surefire way to get burned, and there’s many a FTSE 100 investment trap lurking to separate you from your hard-earned cash. Take British Land Company (LSE: BLND), for example, a share which yields more than 5% for the next couple of years, but one which is loaded with chilling levels of risk.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

More bad numbers

Last time I covered the shopping centre operator, I referenced the British Retail Consortium’s most recent monthly footfall tracker which underlined the terrible conditions for retailers. Unfortunately for British Land, things seem to have got worse, not better, since then.

Physical shopper numbers (footfall) dropped 3.5% in the four weeks to May 25, data showed this week, the worst result for six years and reflecting, in part, the continued political and economic uncertainty created by Brexit.

British Land’s share price may have stabilised since the start of June, but I consider this a mere stay of execution. I fully expect it to sink to fresh multi-year lows sooner rather than later, as it battles the structural problem of online shopping as well as those aforementioned cyclical ones, and I’m prepared to look past its big dividend yields of 5.8% and 6% for fiscal 2019 and 2020, respectively.

Fresh financials last month illustrated the extent of the Footsie firm’s problems. The company announced it had swung to a pre-tax loss of £319m for the 12 months to March from a profit of £501m a year earlier. It also slashed the value of its retail assets by 11.1% year-on-year in a move which drove the value of the property portfolio 4.8% lower at group level.

Shop elsewhere

British Land is reducing the number of retail assets on its books. But this will take years to achieve and with the sector in such disarray, it’s concerning just how much it will get for these hived-off properties.

Besides, the business still plans to hold a substantial stake in the UK’s retail sector (affecting around a third of the group’s assets versus 45% as of today). And, of course, there’s no telling how the company’s office blocks and other assets will be hit as the impact of Brexit drags on the domestic economy.

As of pixel time, British Land deals on a forward P/E ratio of 15.5 times, a rating which I makes it far more expensive given the company’s uncertain long-term outlook and the strong chance of heavy earnings downgrades for 2019 and 2020 forecasts. Rather, I reckon a reading in or around the bargain-basement region of 10 times and below would be a fairer reflection of its profits picture.

Right now there’s a galaxy of terrifically-priced dividend shares to be picked up on the FTSE 100. I’m afraid British Land isn’t one of them. In fact it’s a share I think could cause some serious damage to your shares portfolio.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended British Land Co. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.