Investing in buy-to-let property can be expensive, time-consuming and stressful. That’s without taking into account the extra tax obligations landlords now have to deal with.
With all these headlines, wouldn’t it be easier if you could just click a button and get into the buy-to-let market without having to worry about anything else?
The good news is, is you can do just that with stocks. Today I’m going to highlight two FTSE 100 companies that operate large real estate portfolios and both offer dividend yields of nearly 6%.
Landsec (LSE: LAND) is the UK’s largest publicly traded property company. Right now, investors can snap up shares in this business at just a fraction of what they are worth. At the end of March, the firm reported a net asset value per share of 1,339p, compared to the current share price of around 820p, implying the stock is trading at a 39% discount to net asset value.
However, I don’t think this figure is entirely accurate because, in some areas of the market, commercial property values are falling. With more than half of its property portfolio located in London, Landsec is insulated from this trend to some degree, but the firm is still feeling the pressure. In the year to the end of March, the value of its property portfolio declined by nearly 5%.
That being said, I think it is highly unlikely that property values will decline the 39% that the market is currently implying. On that basis, I reckon the stock looks good value at current levels.
As well as the cheap valuation, shares in Landsec also support a dividend yield of 5.8% so investors will be paid to wait for a recovery in market sentiment.
Shares in British Land (LSE: BLND) are suffering from the same overhang as LandSec.
Investors are avoiding the business due to its exposure to commercial retail property. For its part, British Land is trying to diversify away from this market. It has been selling retail properties and re-investing the proceeds in offices and big projects.
These include the multi-billion pound Canada Water project, which recently received the green light. The £3.3bn project will create more than 3,000 homes and the first new London high street in 100 years as well as more than 1m square feet of office space.
This project could potentially unlock billions of pounds in value for the company, although right now, it does not look as if the market believes it will ever happen.
Shares in the real estate investment trust are dealing at a price to tangible book value of 0.6. I do not believe that this discount takes British Land’s development pipeline into account. On top of the deep discount to net asset value, the stock currently supports a dividend yield of 5.8%.
So, if you are looking to invest in the property industry, I highly recommend checking out this undervalued property giant with its market-beating dividend yield.
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Rupert Hargreaves owns British Land Co and Landsec. The Motley Fool UK has recommended British Land Co and 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 2019