The certainty that Britain will be leaving the European Union with a deal on January 31 has brought a tsunami of buying activity for low-rated UK-focused stocks. Many of the beneficiaries have been companies involved in the domestic retail sector as investors anticipate an upswing in consumer confidence in the new year.
Take Land Securities (LSE: LAND) for instance. This FTSE 100 business, which owns a large portfolio of shopping centres and retail parks, has seen its share price barge through the £10 barrier for the first time in almost two years this December.
But I fear that market-makers may be a bit premature in piling in on the hope of a miraculous improvement in shopper appetite. Data from Springboard has shown the amount of footfall on British high streets drop[ed 8% year on year on the final Saturday before Christmas, annexing hopes of a perky late rush following this month’s general election and providing a serious warning for the coming year.
But Landsec’s woes aren’t compartmentalised to its retail assets, of course. Earlier this month, analysts at Deutsche Bank downgraded the business given the murky outlook for the London office sector, a reflection of persistent Brexit uncertainty that threatens to dominate 2020.
In this environment, City analysts expect Landsec to record earnings dips of 1% and 3% in the fiscal years to March 2020 and 2021 respectively, not catastrophic but periods for which forecasts have been slashed in recent months. And the prospect of more painful reductions in the weeks and months ahead encourages me to avoid the share despite its big dividend yields of 4.8% and 5% for this year and next.
A better property pick
Those seeking a slice of the property market would be much better served buying shares in Glenveagh Properties (LSE: GLV), in my opinion.
Its operations are a world away from those of Landsec, the business being a major player in the Irish housebuilding sector. But thanks to the colossal size of Ireland’s homes shortage, just like here in the UK, it looks likely that profits should keep pounding higher. It’s why property website Daft.ie estimates that despite Brexit uncertainty, the value of the Irish property market is still rising 1% year-on-year to total €519bn.
No wonder that City analysts feel that Glenveagh, undergoing a period of significant production increases is set to record electric profits in 2020, then. A 52% bottom-line rise is currently forecast, one which leads to expectations of a first-ever dividend too.
One for the 2020s
A subsequent 0.6% dividend yield might not be much to get excited about, although Glenveagh’s exciting growth plans make the prospect of electric payout growth over the next decade a very real possibility. The Dublin company’s cluster of open sites the length and breadth of Ireland have a capacity for more than 4,000 new homes, while current planning applications have the potential to deliver in excess of 6,500.
Besides, at current prices, a sub-1 forward price-to-earnings growth (or PEG) ratio of 0.4 times helps to offset this marginal near-term yield. Glenveagh is a share that could deliver some terrific shareholder returns over the next decade.
Royston Wild 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 2019