Is Now the Time to Buy British Land?

LONDON -- I'm always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the FTSE 100 (UKX) and giving my verdict on every member of the blue-chip index. Simply put, I'm hoping to pinpoint the very best buying opportunities in today's uncertain market.

Today I am looking at British Land  (LSE: BLND  ) to determine whether you should consider buying the shares at 568 pence.

I am assessing each company on several ratios:

Price/Earnings (P/E): Does the share look like a good value when compared against its competitors?

Price Earnings Growth (PEG): Does the share look like a good value factoring in predicted growth?

Yield: Does the share provide a solid income for investors?

Dividend Cover: Is the dividend sustainable?

So let's look at the numbers:

Stock Price 3-Yr. EPS Growth Projected P/E PEG Yield 3-Yr. Dividend Growth Dividend Cover
British Land 568p 4.6% 19.1 19.1 3.8% 0 1.1

The consensus analyst estimate for next year's earnings per share is 29.9 pence (0% growth) and dividend per share is 26.6 pence (2% growth).

Trading on a projected P/E of 19.1, British Land appears cheaper than its peers in the Real Estate Investment Trust sector, which are currently trading on an average P/E of around 23.6. Unfortunately, British Land's P/E and lack of near-term growth give a PEG ratio of around 19.1, which cannot really be of any help with my analysis.

British Land supports a 3.8% yield, which is around the sector average of 3.7%. However, British Land has a three-year compounded dividend growth rate of zero, implying the payout could soon begin to underperform its peers in the future.

In addition to its low dividend growth, British Land has a low dividend cover of just over one. However, I believe this is not a significant issue as as British Land is a Real Estate Investment Trust. In particular, this means the company has to pay out 90% of its earnings in order to maintain the preferential tax treatment given to REITs.

Should you buy British Land for its yield?
Despite the low near-term growth projected for British Land, I believe the group is currently undervalued. You see, British Land's property portfolio is currently valued at around 596 pence a share, which means the shares are currently trading at a 4.6% discount to the net value of the company's assets.

That said, I believe one of the biggest issues overhanging the company is the outlook for commercial property. I can see up to 60% of British Land's portfolio is focused on retail assets, which could be a problem for the group as high-street rents remain depressed around the country.

In addition, some City analysts have speculated the group could face significant revenue falls from its commercial office space in London's financial district. These analysts believe increased regulation and higher taxes could see some financial businesses relocating elsewhere in the world -- resulting in lower occupancy rates for British Land.

Anyway, I do not believe these worries will come to light in the near term. Furthermore, I believe there is currently a good opportunity to take advantage of British Land's discount to its asset value. So overall, I feel now looks to be a good time to buy British Land at 568 pence.

More FTSE opportunities
As well as British Land , I am also positive on the FTSE shares highlighted in "8 Dividend Plays Held by Britain's Super Investor." This exclusive report reveals the favorite income stocks owned by Neil Woodford -- the City legend whose portfolios have thrashed the FTSE All-Share by 200% during the 15 years to October 2012.

The report, which explains the full investing logic behind Woodford's dividend strategy and his preferred blue chips, is free to all private investors. Just click here for your copy. But do hurry, as the report is available for a limited time only.

In the meantime, please stay tuned for my next verdict on a FTSE 100 share.


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9/27/2016 12:01 PM
BLND $626.93 Up +1.43 +0.23%
British Land Co CAPS Rating: No stars