Real estate investment trusts (REITs) haven’t exactly been in fashion, with elevated interest rates dragging down property values and making debt-heavy balance sheets a painful burden.
Even so, a handful of real estate businesses continue paying growing, cash-covered dividends at a genuinely tasty discount. So much so that investors can lock in a chunky passive income overnight while also shoring up their portfolios with some defensive ballast as economic uncertainty creeps back in.
And right now there’s one REIT in particular that I’ve already added to my income portfolio.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
Meet LondonMetric Property
Right now, LondonMetric Property (LSE:LMP) offers a 6.4% dividend yield. Normally, high payouts like this signal some structural weakness or risk factor in the underlying business. But taking a closer look, this particular enterprise seems to be in genuinely good shape, despite what the share price and yield might suggest.
As a quick crash course, LondonMetric owns and manages warehouses, food stores, healthcare buildings, and leisure sites across the UK, all leased on a long-term basis to mature industry leaders like Tesco and Amazon.
Rather than chasing flashy office towers or shopping centres, it focuses on unglamorous but resilient property types that people and businesses rely on no matter what the economy is doing. And the latest trading update published last month showed exactly that.
Occupancy climbed to 98.3%, up from 97.7% at the start of the financial year, while average lease lengths remain a healthy 17 years. That kind of long-term, near-fully-let portfolio gives income investors real visibility over future rent cheques.
Rental growth is also running hot. LondonMetric secured £6.7m of additional annual rent from 72 asset management deals since April, including rent reviews delivering average uplifts of 16%, with logistics properties seeing uplifts as high as 23%.
Chief executive Andrew Jones said the company is “maximising our income quality, granularity and growth”, while continuing to sell off non-core assets and reinvest into higher-quality convenience and food store properties.
That’s a business actively upgrading its portfolio, not just sitting still. And so far, that’s culminated in 11 years of continuous dividend growth.
So is this a no-brainer?
While I’m bullish on this business, I can’t ignore the genuine risks and challenges surrounding the business.
For example, LondonMetric’s in the process of a proposed takeover of Picton Property Income. Big acquisitions like this always carry integration risk, and if the deal doesn’t complete smoothly, it could distract management or dilute returns in the short term.
This risk’s only compounded by the added debt and the firm’s sensitivity to interest rates. If borrowing costs stay elevated for longer than expected, that raises the cost of financing new deals and can weigh on property valuations across the sector, even for well-run businesses like this one.
A REIT worth considering?
All things considered, LondonMetric looks like a genuinely well-managed REIT, with rising occupancy, growing rents, and a clear strategy of upgrading its portfolio over time.
That’s why it’s currently one of the larger positions in my passive income portfolio. And for dividend investors looking to add a more defensive business to their own portfolios while also enjoying a chunky yield, I think LondonMetric’s a name worth investigating further. And it’s not the only one…
Should you invest £5,000 in LondonMetric Property Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if LondonMetric Property Plc made the list?
Zaven Boyrazian owns shares in LondonMetric Property.
Real estate investment trusts (REITs) haven’t exactly been in fashion, with elevated interest rates dragging down property values and making debt-heavy balance sheets a painful burden.
Even so, a handful of real estate businesses continue paying growing, cash-covered dividends at a genuinely tasty discount. So much so that investors can lock in a chunky passive income overnight while also shoring up their portfolios with some defensive ballast as economic uncertainty creeps back in.
And right now there’s one REIT in particular that I’ve already added to my income portfolio.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
Meet LondonMetric Property
Right now, LondonMetric Property (LSE:LMP) offers a 6.4% dividend yield. Normally, high payouts like this signal some structural weakness or risk factor in the underlying business. But taking a closer look, this particular enterprise seems to be in genuinely good shape, despite what the share price and yield might suggest.
As a quick crash course, LondonMetric owns and manages warehouses, food stores, healthcare buildings, and leisure sites across the UK, all leased on a long-term basis to mature industry leaders like Tesco and Amazon.
Rather than chasing flashy office towers or shopping centres, it focuses on unglamorous but resilient property types that people and businesses rely on no matter what the economy is doing. And the latest trading update published last month showed exactly that.
Occupancy climbed to 98.3%, up from 97.7% at the start of the financial year, while average lease lengths remain a healthy 17 years. That kind of long-term, near-fully-let portfolio gives income investors real visibility over future rent cheques.
Rental growth is also running hot. LondonMetric secured £6.7m of additional annual rent from 72 asset management deals since April, including rent reviews delivering average uplifts of 16%, with logistics properties seeing uplifts as high as 23%.
Chief executive Andrew Jones said the company is “maximising our income quality, granularity and growth”, while continuing to sell off non-core assets and reinvest into higher-quality convenience and food store properties.
That’s a business actively upgrading its portfolio, not just sitting still. And so far, that’s culminated in 11 years of continuous dividend growth.
So is this a no-brainer?
While I’m bullish on this business, I can’t ignore the genuine risks and challenges surrounding the business.
For example, LondonMetric’s in the process of a proposed takeover of Picton Property Income. Big acquisitions like this always carry integration risk, and if the deal doesn’t complete smoothly, it could distract management or dilute returns in the short term.
This risk’s only compounded by the added debt and the firm’s sensitivity to interest rates. If borrowing costs stay elevated for longer than expected, that raises the cost of financing new deals and can weigh on property valuations across the sector, even for well-run businesses like this one.
A REIT worth considering?
All things considered, LondonMetric looks like a genuinely well-managed REIT, with rising occupancy, growing rents, and a clear strategy of upgrading its portfolio over time.
That’s why it’s currently one of the larger positions in my passive income portfolio. And for dividend investors looking to add a more defensive business to their own portfolios while also enjoying a chunky yield, I think LondonMetric’s a name worth investigating further. And it’s not the only one…
Should you invest £5,000 in LondonMetric Property Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if LondonMetric Property Plc made the list?
Zaven Boyrazian owns shares in LondonMetric Property.
