6.5% yield and a P/E of only 12.3! Is this forgotten income stock now a bargain?

I have scope to add another dividend income stock to my portfolio, and I’m on the hunt for something different.

I already have a lot of exposure to high yielding financials like IM&G again Phoenix Group Holdings share price. They have been paying huge dividends while delivering strong share price growth. That’s good news to me, but investing is cyclical, and after such a strong performance the momentum in their share price may be slowing down.

So I’m diversifying all my money and looking at a different sector, real estate investment trusts, or REITs. They may tempt investors because to qualify as a REIT, a company must pay out at least 90% of its qualified profits as dividends. Capital growth can reach a high, although it has been lacking for some time. Is that about to change?

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Landsec shares struggle

Land Securities Group (LSE: LAND) is one of the UK’s largest commercial property owners and developers, with a diverse portfolio of offices, shopping centers and high street stores. On paper, it ticks a lot of boxes. In fact, the stock price has been struggling for most of the last decade. After surpassing 1,000p almost 10 years ago, it is trading at close to 620p today.

The real damage was done during the riots, when lockdowns led to the collapse of shops and the on-demand operation of hammer-built offices. Rising inflation and interest rates then deliver another blow, increasing the cost of capital, foreclosing on real estate, and leaving consumers feeling poor.

Yet despite all this, basic rents have held up well. Occupancy stood at a robust 97.7%, while rents increased by 5.6% in the six months to 30 September.

Profits are reduced to losses

That said, the profits have taken a hit. Latest pre-tax profit fell from £243m to £98m, mainly due to a £67m loss on a £644m sale of assets which returned little or nothing. The board is now restructuring the portfolio towards higher quality assets, but that means enduring some short-term pain.

Landsec is also involved in housing. That sector has also struggled, given the performance of housebuilders, but falling interest and mortgage rates, combined with Britain’s chronic housing shortage, could lift the outlook.

I’m not the only one feeling very happy, with shares up 6.5% over the past year. This looks like the first stage of a potential recovery, but the shares still look good value. The price-to-earnings ratio remains at just 12.3, while the price-to-book ratio is 0.7. Although given the recent share price performance, Lansec has a lot to be proud of.

Investors will also be wary of total debt of £4.4bn, which sits just below the company’s market value of £4.6bn.

it paid a dividend of 6.5%. Landsec’s share price may rebound in the broader economic environment, but while there is potential value here, I find it hard to argue that this is the kind of mispricing that only comes along in a generation. I’m still holding on to my income-paying financial stocks.