As customers take longer to pay rent, the development company may need to restructure its income sources
Land Securities to relaunch dividend in November following April’s freeze
- Update shows customers are taking much longer to pay their rent, with only 60% received within five days – compared to 90% last year
- Retail sector remains in trouble, with just 29% paying on time compared to the 92% for this cohort in 2019
- Crisis will refocus the Group’s efforts to transition more of its portfolio to residential from retail given the structural shift to online shopping has been spurred by the crisis
- Recommendation: We maintain our Hold recommendation
Land Securities confirmed this morning that it will reinstate paying dividends in November, despite the current crisis within the UK dividend and income space. This comes amid a trading update showing that customers are taking much longer to pay their rent. For the rent due on the 24th of June only 60% was received within five days, whereas for the same period last year this figure was 90%. While their office renters were generally paying on time, the retail sector who were already struggling last year are in even more trouble now, with just 29% paying on time compared to the 92% for this cohort last year.
Despite the lifting of lockdown measures set to take effect this weekend, retailers, restaurants and pubs will still be under severe pressure and it’s difficult to see this group improving their timeliness on paying dividends in the near term. With more of this group going into administration, a larger portion of the rent due will have to be written off.
The crisis will refocus the group’s efforts to transition more of its portfolio to residential from retail, especially given the structural shift to online shopping that’s been spurred by the crisis.
The news surrounding the resumption of dividends is no doubt an encouraging sign of confidence but the size of the dividend is yet to be determined. We take the view that dividends here, along with the rest of the market, will still take some time to fully recover to pre- crisis levels. Investors should take a cautious stance on the sector given that the crisis may force it to change its business model should working from home become stickier, resulting in tenants needing less office space over the medium to long term. We maintain our Hold recommendation.
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