I already own a number of stocks that pay a regular and consistent dividend in order to boost my passive income stream. Another stock I am considering is British Land (LSE:BLND). Here’s why I like the look of the shares, as well as the potential pitfalls.
Real estate investment trust (REIT)
British Land is a REIT that specialises in London-based property that it calls ‘campuses.’ At present, it manages a total of £13bn worth of assets, owning almost £10bn of these. Income-yielding property provides stable returns to shareholders, and REITs must return 90% of profits to shareholders. I own a few REITs already as a part of my holdings.
So what’s happening with British Land shares currently? Well, as I write, they’re trading for 395p. At this time last year, the stock was trading for 477p. This equates to a 17% decline over a 12-month period.
Passive income stocks have risks
I believe the biggest issue that could affect British Land currently is the economic outlook. Due to soaring inflation, a cost-of-living crisis has emerged. Because of this, rent collection could become a problem for British Land. This, in turn, could then impact performance as well as shareholder returns.
In addition to this, British Land currently has a diverse portfolio of properties, some with potentially uncertain futures ahead. An example of this is office buildings. Due to the pandemic, working habits have changed as companies adopt remote working. Could demand for office space fall and affect performance and returns?
British Land also has many retail outlets too. With the rise in e-commerce, there is a chance performance and returns could be negatively affected by dwindling demand for retail space too.
Why I like British Land shares
Away from the negative aspects, here’s why I like British Land shares. Firstly, the dividend yield on offer is close to 5.2%. This is higher than the FTSE 100 average of 3%-4%. I am conscious that dividends are never guaranteed, however. They can be cancelled at the discretion of the business at any time.
Secondly, British Land shares look good value for money right now on a price-to-earnings ratio of just four. A ratio below 15 is generally thought to represent value for money.
In addition to these two points, I’m buoyed by British Land’s historic track record, profile, and presence. In fact, it is one of the UK’s oldest property businesses with roots stretching back to the 1850s. This tells me it has the experience and knows how to navigate uncertain times, as well as unexpected events. Furthermore, it has moved with the times in the years gone by to continue evolving.
To summarise, I am aware of the risks involved when it comes to British Land, especially with the current economic climate and changing work and retail landscape. Despite these issues, I am always looking to optimise my portfolio, even if I can’t buy every stock I like the look of. British Land is a stock I would be willing to buy to boost my holdings.
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Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has recommended British Land Co. 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.