6 property stocks for a blue-chip retirement

5 property stocks for a blue-chip retirement

Property businesses can be an excellent source of income in retirement.

Tom Richardson

Tom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) and has more than a decade's professional experience in the investment management industry in Australia and the UK. Tom now works as a writer and editor for TMF Australia and has two easy to remember rules of investing he likes to follow. Avoid overpaying for growth stocks and avoid paying at all for stocks that are cheap for a reason. Tom prefers growth investing over value investing and says it's not rocket science, just avoid overpaying for the best returns.

Published June 18, 2014 9:07 am AEST

When it comes to income investing some of the best options are in the property sector, including Real Estate Investment Trusts (REITs) and property developers. Their defensive earnings streams tend to equal consistently high yields, with generally less risk than smaller businesses that are more leveraged to economic cycles or competitive pressures.

One of the best for yield and the advantages of economy of scale is Westfield Retail Trust (ASX: WRT). Its yield is 6.4% with consensus analyst estimates for steady payout growth up until 2016. With a market value of around $9.5 billion and firm grip on the shopping-centre market across Australia and New Zealand it looks good value selling for $3.21.

The more internationally-focused Westfield Group (ASX: WDC) is another appealing option for income seekers. Selling for $10.89 it offers a yield of 4.79% based on projected earnings. Both the Westfield businesses are the subjects of an attempted corporate restructure currently, but that should not put off long-term income seekers.

Lend Lease Group (ASX: LLC) is a global property and infrastructure group with interests largely in construction. It is contracted to help develop the Barangaroo South development in Sydney, which will include residential development and a luxury entertainment complex and casino to be run by Crown Resorts Ltd (ASX: CWN). Lend Lease sells for around 14 times projected earnings with a yield around 3.6% based on projected dividends.

Stockland Corporation Ltd (ASX: SGP) is another business nicely leveraged to the growth in residential property values and development in Australia. It like Mirvac Group (ASX: MGR) is heavily involved in cost effective unit development where changing lifestyles means demand is increasing over the long term. Both businesses are also heavily involved in the red hot Sydney and east coast residential markets. Based on projected dividends, Stockland trades on a yield around 5.95%, while Mirvac trades on an estimated yield of 4.90%. Both look solid buys for property exposure.

Property businesses also have the option to grow through acquisition, as evidenced by Stockland's recent attempted takeover of Australand Property Group (ASX: ALZ). But does Stockland offer the best potential combination of capital gains and dividend income for investors? Probably not as good as one other stock with…

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