LondonMetric Property (LSE:LMP) shares have fallen from 216.2p to around 181.7p, a drop of roughly 15.5% from its 52-week high. Naturally, that’s irked some investors, and it’s easy to see why.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

The UK property sector hasn’t had the best time in recent years, so people probably fear the worst. But I don’t see a broken company – yet. I see a dividend yield approaching 7% that wasn’t available a few months ago.

Still, while the sell-off has made the income more appealing, it hasn’t removed the risks.

The yield’s risen for a reason

The first thing to understand is simple maths. LondonMetric’s dividend hasn’t suddenly become dramatically more generous. Instead, its share price has fallen, which mechanically pushes up the yield.

At around 180p, the shares offer a trailing yield of about 6.9% – comfortably above the company’s historical median yield of 5.36%. In practical terms, a £1,000 investment at 180p could generate roughly £70 of annual income, before costs and tax.

But a rising yield can be a gift or a warning – the trick’s working out which one this is.

The income story hasn’t collapsed

There’s a decent case that the market’s being too pessimistic. In the year to 31 March, LondonMetric’s EPRA earnings rose 13.9% to £305.3m. Meanwhile, net rental income climbed 16.6% to £455.3m, helped by acquisitions and rental growth.

The business isn’t dependent on fragile office tenants either. It focuses on long-income, logistics-led property, with 98% occupancy and a 17-year average lease term at the year-end. That gives it more predictable rental income than many traditional property companies.

Chief executive Andrew Jones said the company’s “all-weather portfolio” was aligned to “winning sectors”, with rental income continuing to grow to record levels.

If rental growth and occupancy hold up, today’s yield could prove generous rather than unsustainable.

But the risks are real

To be fair, LondonMetric’s sell-off isn’t entirely without reason. If interest rates remain stubbornly high, it could pressure property values and make refinancing more expensive. Plus, there’s risk of further downward revisions to net tangible assets – a serious concern for the property sector.

Besides, brokers have turned more cautious. Jefferies cut its target from 225p to 217p, while Berenberg reduced its target from 282p to 252p. Both kept positive ratings, but neither’s pretending the valuation risks have disappeared.

Which begs the question: is the dividend payout sustainable? Current figures show a payout ratio of 92%, meaning only 8% of profits are retained for other purposes. That leaves limited margin for error if financing costs rise or rental growth slows.

So yes, the high yield is attractive. But only if the company can keep paying – not just next year, but for years to come.

Tempting, but not a blind Buy

In my view, LondonMetric’s moved from an uninteresting ‘background’ stock to a ‘watch closely’ option. The falling share price and boosted yield makes it worth considering, from both a value and income perspective.

But it isn’t yet a blind Buy. I’d keep a close eye on occupancy stability, continued rental growth, and evidence of sustainable dividend coverage. The half-year results on 24 November should provide more clarity in this regard.

The sellers could still be right. But when a price falls, it pays to dig deeper and find out why — sometimes, it offers more opportunity than disaster.

Should you invest £5,000 in LondonMetric Property Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if LondonMetric Property Plc made the list?

Mark Hartley does not hold any positions in the companies mentioned.