Should You Buy Land Securities Group Today?

LONDON -- Shares in real-estate investment trust (REIT) Land Securities Group  (LSE: LAND  )  have gradually edged higher over the past year, striking their highest since summer 2011 above 863 pence in the process. And I believe that the stock has the legs to punch further solid gains as its development pipeline rumbles promisingly forwards, propping up its reputation as a lucrative dividend bet.

Earnings rebound expected from this year
Land Securities announced in January's interims that it signed 5.8 million pounds worth of new lettings in London since the beginning of the third quarter, with an additional 8.6 million pounds being dealt with by solicitors. It inked 5 million pounds of new lettings in its Retail portfolio, with a further 1.4 million pounds in solicitors' hands. The firm has also started work on its Kings Gate and Zig Zag Building assets in the capital, due to open in 2015.

City analysts expect earnings per share to drop 8% in the year ending March 2013, to 36 pence, results for which are due on 15 May. However, these are expected to bounce back over the medium term -- an 8% rise for 2014, to 38 pence, is expected to be followed by a 9% increase the following year to 42 pence.

Land Securities currently deals on a P/E ratio of 22.3 for this fiscal year, and which is predicted to drop to 20.5 in 2015. This provides a chunky discount to a forward earnings multiple of 24.5 for the entire London-listed REITs sector.

An attractive dividend play
As is the case with all REITs, Land Securities is liked by investors seeking bulky investment income. The firm was forced to slash its total dividend in both 2009 and 2010, however -- from 2008's 64 pence payout, these fell to 56.5 pence the following year, before collapsing earnings forced Land Securities to drive the payout to 28 pence in 2010.

But a recovering financial performance has enabled the company to rebuild its dividend policy. The company is expected to build the payment to 29.9 pence for March 2013 from 29 pence in 2012, providing a 3.5% yield. And broker estimates put the full-year 2014 and 2015 dividend to register at 30.9 pence and 32.5 pence respectively, carrying yields of 3.6% and 3.8%.

Although this is lower than a current average dividend yield of 4.5% for the U.K. REITS sector, the company does at least offer dividend coverage above the sector's low aggregated reading of 1 times earnings -- Land Securities boasts coverage of around 1.3 times for 2014 and 2015. This is still below the safety benchmark of 2 times, but this is to be expected given the requirement for such companies' to deliver the majority of income back to stakeholders.

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