GPT Group lifts its earnings forecast: Should you buy?

Here's why an earnings forecast increase from 'not much' to 'a little bit more than not much' should keep investors interested in GPT Group (ASX:GPT).

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In a late-year surprise, GPT Group (ASX: GPT) announced to the market this morning that better-than-expected performance in its funds management division in the previous quarter has lifted the company's full-year EPS growth outlook from 3% to 'at least 4%'.

While it's a modest improvement the development is promising, particularly following on from full year EPS growth of 6.1% last year.

Strong performance in retail and specialty store sales throughout the portfolio combined with new office leases of 62,670sqm during the quarter and funds under management growth of 29% in the year to date.

Management also points out that GPT retains a 'fortress' balance sheet with gearing at a low 28.5% and a weighted average cost of debt sitting at a cheap 4.8%.

With all this good news, investors might be surprised to learn that GPT group actually looks quite cheap on conventional metrics, especially considering its 5.1% dividend yield.

Somewhat unusually for property funds, GPT is actually trading on a P/E ratio of 12.5, below the ASX average and considerably lower than similar businesses Stockland Corporation Ltd (ASX: SGP) at 17.4, Scentre Group (ASX: SCG) at 17.8, and Goodman Group Pty Ltd (ASX: GMG) at 16.

This is because the lower P/E ratio also (mostly) corresponds with a lower dividend, with Stockland paying 5.8%, Scentre paying 5.9% and Goodman paying 3.9%.

Income-seeking investors could do a lot worse than GPT Group given its strong (albeit unfranked) dividend and consistent earnings performance.

You could also do better, with The Motley Fool's Top Dividend Stock for 2014 paying a mouthwatering 4.5% (fully franked) and rapid growth prospects.

Motley Fool contributor Sean O'Neill owns shares in Scentre Group.

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