These FTSE 100 dividend stocks yield 5.6% and 9.6%. Which would I buy for my ISA?

These FTSE 100 dividend stocks boast big, big yields. But are they worth a place in a Stocks & Shares ISA?

| 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.

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.

A quick look at British Land’s (LSE: BLND) share price performance over the past few weeks would suggest that market-makers were expecting a scary set of trading numbers when half-year numbers were unveiled today.

Its share price plummeted to one-month lows around 550p per share in the run-up to Thursday business but rose modestly in the wake of the release. British Land’s interims might have been broadly what investors had been expecting, but there was enough in there to suggest the share price could continue its recent slide.

This is why I’m happy to avoid the FTSE 100 property play despite its market-beating forward 5.6% dividend yield.

Losses widen

In that latest update British Land, which operates retail and office space the length and breadth of the country, announced that ongoing difficulties in the shopping sector meant that pre-tax losses had ballooned in the six months to September. These came in at £404m versus a milder £48m a year earlier.

Equally shocking was news that troubles on the high street caused British Land to write down the value of its property portfolio by 4.3%, to £11.7bn. In total the business slashed valuations on its retail assets by a tenth (or 10.7% to be exact) and these are now worth £4.8bn. By comparison, the value of its office estate, that other core area, rose by a modest 0.4% to £6.4bn.

And worryingly there could be more trouble on the horizon, the Footsie firm advising that “we expect retail to remain challenging, so we’ll focus on driving operational performance and maintaining occupancy.”

On shaky ground

That latter goal could prove increasingly problematic, however, as a combination of cooling revenues growth and rising costs forces more and more physical retailers out of business. It’s not just that political and economic conditions and the subsequent impact on consumer appetite look set to last through 2020 at least. It’s that the rampant growth of e-commerce threatens to keep British Land’s property values dwindling over the longer term too.

Despite its rising problems and recent share price weakness, the property business still trades on a forward P/E ratio of 16.7 times, sailing above the FTSE 100 average of 14.5 times. This high rating doesn’t correspond with its rapidly-rising risk profile, in my opinion, and leaves the business wide open for much more sharp share price weakness.

I’d buy this 9.6% yield instead

If you’re looking to get rich from property then Persimmon (LSE: PSN) is a much better bet, in my opinion, and not just because of its superior value for money. At current price the housebuilder changes hands on a forward P/E multiple of 9.1 times and boasts a gigantic 9.6% corresponding dividend yield as well.

This Footsie share also updated the market this month but unlike British Land, its own financials contained no nasties. Sure, flatter property prices than in previous years may be hurting profits growth, but the UK’s vast homes shortage means that trading at Persimmon and its peers remains quite robust.

Both weekly average sales per site and forward sales remained broadly stable (at 0.67 and £950m respectively) between the beginning of July and November 6, the company said. It’s quite likely revenues will rise markedly once it ramps up production too.

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.

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.

More on Investing Articles

Investing Articles

3 of my top FTSE 250 stocks to consider buying before April

Buying undervalued UK shares can be a great way to generate long-term wealth. Here, Royston Wild reveals a handful on…

Read more »

Ice cube tray filled with ice cubes and three loose ice cubes against dark wood.
Investing Articles

Just released: our 3 top income-focused stocks to buy before April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

Is this the best chance to buy cheap FTSE 100 shares in a generation?

I want to buy shares when they're cheap, and sell... never, just keep taking the dividends. And the FTSE 100…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Could NatWest shares be 2024’s number one buy for passive income?

For those of us looking to earn some long-term passive income, how does NatWest's 7% dividend yield sound? It sounds…

Read more »

Investing Articles

£12K in savings? Here’s how I could turn that into £13K annual passive income

This Fool explains how investing a lump sum can help her build a passive income stream to enjoy in her…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Here’s why Rolls-Royce shares are now set to fly over the £4 mark

Once again, Rolls-Royce shares are crushing the FTSE 100. Should I add to my holding of this stock at the…

Read more »

Investing Articles

1 under the radar FTSE 100 AI stock investors should consider buying

Our writer explains why this FTSE 100 pick could be a shrewd investment with its established experience of using AI…

Read more »

Investing Articles

Does the beaten-down Diageo share price make it a no-brainer buy?

Harvey Jones spent years waiting for the Diageo share price to look like good value, before finally buying it in…

Read more »