The Mirvac Group (ASX: MGR) share price edged higher to $3.19 this morning after the commercial and residential property group provided a generally positive update for performance over the quarter to September 30 2019.
When including dividends the stock is up more than 100% for investors over the past 5 years as the group's big dividend and defensive earnings stream continue to attract investors.
Its commercial office business continues to benefit from its positioning in prime Melbourne and Sydney property markets that possess strong underlying demand.
While residential property prices in Sydney and Melbourne remain generally strong and support the group's sales of new build apartments.
The one weak spot is the tough conditions for retailers that commonly have Mirvac as a landlord, but the group claimed this division continued to post "solid" results despite the well-known problems.
Most importantly for investors the group is still expecting to pay total dividends of 12.2 cents per share (cps) on earnings between 17.6cps to 17.8cps over fiscal 2020. If delivered this would represent respectable growth of 5% and 3%-4% respectively over fiscal 2019.
At $3.19 the stock trades on around 18x forecast earnings, with a forecast yield of 3.8%. This is expensive by historical standards and unfortunately is a reflection of how ultra-low interest rates are forcing investors to accept lower yields in compensation for the risks in equities.
While rates remain ultra-low the stock's valuation is likely to hold up, but if there is even a change in expectation as to the direction of the rate cycle there could be a rush for the exits.
Other popular property businesses on the local market include Goodman Group (ASX: GMG) and Westfield operator Scentre Group Ltd (ASX: SCG).