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Dividends are back! I’d buy this bargain FTSE 100 stock for long-term income

Harvey Jones
One pound coin

The stock market crash is throwing up bargain FTSE 100 stocks everywhere you look. Unfortunately for income seekers, roughly half the index has stopped paying dividends due to the coronavirus pandemic and recession.

Today, there’s light on the horizon. The UK’s largest commercial property development and investment company Land Securities Group (LSE: LAND) has announced it will reinstate dividends later this year. This bargain-priced FTSE 100 company says its tenants are now reopening premises and welcoming customers back.

This is another step out of lockdown, with the government further easing restrictions tomorrow. Investors should be cautiously celebrating.

Check out the Land Securities share price

Today, Landsec issued a promising update on June rent collection, and its share price is up around 2% as a result. All of its shopping centres and outlets are now open. On 30 June, some 79% of its retail units were trading, while 16 of its 18 leisure parks were also open. 

Landsec management said footfall levels are “encouraging”. They’re around 60% of last year levels, but like-for-like store sales have increased by 80%. As seen elsewhere in the retail industry, customers are venturing out less, but spending more when they do. You may find other FTSE 100 retail bargain stocks as a result.

The £4.33bn’s group’s estate of high-quality offices is also open, with occupancy levels rising as customers return to work. Only its Accor-managed hotels remain closed, but with a phased opening planned over the next three months.

I’d buy this bargain FTSE 100 stock

On 24 June, £122m of rent fell due. Of this, 60% was paid within five working days, which is well down from 94% last year. The group is holding “supportive and constructive dialogue” with tenants who’ve fallen behind. It has allocated £9m of “concessions”, out of its £80bn rent relief war chest. The pandemic will still hurt Land Securities.

Today’s update is a positive sign the economy is creaking back into life, and I’m hoping the process should accelerate. Just as long as we don’t get further lockdowns.

Management also said Landsec is “financially robust”. At 30 June, adjusted net debt stood at £3.92bn, down marginally from £3.93bn at 31 March. It has £1.2bn of cash and available facilities, boosting my faith in this FTSE 100 stock’s bargain potential. Today’s upbeat update is encouraging, coming so shortly after shopping centre management and development company INTU went into administration.

I’m calling this FTSE 100 share a bargain because its share price is still down 40% since the start of the pandemic. That leaves it trading at 10.3 times earnings, if you can rely on traditional valuation metrics such as the P/E ratio. I’m not sure you can though.

The board now intends to reinstate payments following its half-yearly results announcement on 10 November. If you’re looking for long-term income, keep a close watch on this bargain FTSE 100 stock. I think it’s on the way back.

Here’s another to consider right now…

The post Dividends are back! I’d buy this bargain FTSE 100 stock for long-term income appeared first on The Motley Fool UK.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Landsec. 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.

Motley Fool UK 2020