When investors want passive income from the FTSE 100, many reach for the same names: Legal & General, M&G and Aberdeen Group. But the past month hasn’t been kind to them.
M&G’s fallen 8.5% and Aberdeen’s down 11.8%, even though both still yield around 6.5%. L&G’s doing better, but its growth has tapered off.
See, chasing high yields isn’t a strategy on its own. If most income investors own the same finance-heavy portfolio, they don’t really have diversification – they have concentration with different tickers.
That’s why I’ve been analysing the changing market landscape and looking for more diverse options. One that I think deserves a closer look is commercial property landlord Land Securities (LSE:LAND).
Why I’m questioning the usual picks
Legal & General’s still a serious dividend payer. It paid a 21.79p dividend for 2025, implying a trailing yield of roughly 7.3% at a share price near 299.6p.
But valuation matters too. The average broker target is about 277p, below the recent share price. It seems analysts don’t envision much more growth after a decent rally earlier this year.
That isn’t saying it can’t be a solid long-term holding. It has scale, capital generation and a large dividend. But income investors are often blinded by yield and forget to ask where earnings come from and whether the shares are expensive.
The case for Land Securities
Land Securities offers a different kind of income. Instead of relying on insurance profits and regulatory capital, it collects rent from offices and retail properties.
Its latest annual results were encouraging:
- Like-for-like net rental income grew 4.6% (ahead of initial guidance of around 3%-4%).
- Occupancy reached 98%, the highest level in two decades.
- Higher rental renewals nearly doubled to 15%, so tenants are happy to pay more.
The company also increased its full-year dividend by 2% to 41.2p per share, giving it a meaty yield of 6.3%. But the best part? The average analyst target is roughly 725p – about 11% higher than today. That gives LandSec a more tangible income and growth story beyond just a sparkly yield.
Still, it isn’t risk-free
Property certainly has its quirks, and LandSec’s no stranger to them. Interest rate changes, property value fluctuations, lease expiries and softening rental demand are all risks it faces.
For example, if borrowing costs stay high or tenants struggle to pay, rental growth could slow. Plus, it distributes more than 90% of its profits as dividends, leaving limited room for error if rental income weakens.
So like any stock, never make a decision based purely on yield. The real argument is that occupancy, rental growth and the dividend are improving, while property exposure adds diversification to a portfolio.
A portfolio decision
For an investor portfolio already clogged with finance stocks, Land Securities is an appealing shift away from the norm. It needn’t replace something like Legal & General – the insurer still has a lot to offer – simply complement it.
With growing rental income, high occupancy and a more diverse profit source, LandSec’s now near the top of my passive income watchlist.
But it’s not the only one of its kind. The FTSE 100 hosts another similarly appealing income gem that’s also worth a closer look.
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Mark Hartley owns shares in Legal & General.
This story originally appeared on Motley Fool
