Please ensure Javascript is enabled for purposes of website accessibility

Should You Buy Land Securities Group Today?

By Royston Wild - Apr 18, 2013 at 12:02PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

How attractive are the shares of Land Securities Group?

LONDON -- Shares in real-estate investment trust (REIT) Land Securities Group (LAND 0.21%) 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.

Bolster your investment income with the Fool
If you already hold shares in Land Securities, and are looking for more FTSE 100 winners to really jump start your investment income, then you should check out this brand new and exclusive report covering a multitude of other premium payers right now.

Our "5 Dividend Winners to Retire On" wealth report highlights a selection of tasty stocks with an excellent record of providing juicy shareholder returns. Among our picks are top retail, pharmaceutical and utilities plays which we are convinced should continue to provide red-hot dividends. Click here to download the report -- it's 100% free and comes with no obligation.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Land Securities Group plc Stock Quote
Land Securities Group plc
LAND
$757.00 (0.21%) $1.60

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
322%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.