Why I’d sell this FTSE 100 company ahead of its interim results

Why this Fool is advising extreme caution before investing in this FTSE 100 (INDEXFTSE: UKX) company.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

How often have you heard investors waxing lyrical about the benefits of investing in bricks and mortar? In truth, I have also been guilty in the past of such unquestioning belief. However, this faith has been shaken in recent years following the poor performance of some property companies. One such company is Land Securities (LSE: LAND), which has seen a plunging share price matched by falling asset values.

On the 1st of May this year, prior to the release of Land Securities’ annual report, the share price stood at 920p. At time of writing, despite an increase in the dividend, the shares have fallen to 826p. This represents about a 10% drop in only 7 weeks, which is hardly a ringing endorsement of the company’s future prospects by Mr. Market.

What’s causing the fall?

Broadly, Landsec’s portfolio of properties encompass retail, leisure, office and residential. With the exception of residential, all of these sectors are under exceptionally intense pressure.

Undoubtedly, Landsec’s retail segment is suffering the most due to the success of e-commerce sites such as Amazon. In addition to Amazon, there are a variety of new companies chipping away at markets traditionally supplied by “bricks and mortar” retailers. Witness the booming profits of the British online fashion retailer Boohoo compared to sliding earnings at former giants of fashion such as Arcadia and Ted Baker.

Even big ticket items such as furniture are not escaping the steady forward march of web sales. Nowadays, a relatively new American company, Wayfair, offers buyers the opportunity to purchase all manner of household goods at low cost via its website.

The result of the slump in the popularity of big name retailers was laid bare in the annual results released by Landsec in May. Revealed was a sizeable loss brought about by the demise of such companies as Homebase and Poundworld. Further pain is expected as a consequence of the well-publicized tribulations at Arcadia and Debenhams. If these losses were not bad enough, Landsec’s retail portfolio also experienced a sharp drop in value.

I imagine everyone on the planet is by now aware that the UK is leaving the European Union. Since the announcement, there has been an unfaltering stream of news indicating the repercussions for the office sector of this divorce. Regular reports have appeared telegraphing the intensions of the behemoths of banking and insurance that they will expand their offerings on mainland Europe and downsize their London operations. I think it’s fair to assume that Brexit is a negative development for Landsec.

An indicator of further trouble comes from the unlikely source of the annual reports of one of the world’s biggest hotel groups, InterContinental Hotels Group. Despite rising revenue, there has been a marked decline in gross profits as the hotelier struggles to compete with Airbnb and others. This is certainly a nasty omen for the hotel segment of Landsec’s stable of assets.

To sum up

Current trends do not herald a reverse of fortunes any time soon for Landsec’s share price. Thus, I advocate wariness to investors considering Landsec for its attractive dividend of 5.8% – there are plenty of alternatives for a safer dividend out there.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Bryan Williams has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group, InterContinental Hotels Group, Landsec, and Ted Baker. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »