In recent days, I looked at 888 Holdings and explained why it was a better stock pick than Lloyds Banking Group (LON:LLOY), and not just because of its superior dividend yields.
Here, I intend to discuss Crest Nicholson Holdings (LSE: CRST), another splendid income stock from the FTSE 250 I’d always buy over the Footsie-quoted banking colossus. Come take a look.
Big yields, stunning value At current share prices, Crest Nicholson carries a gigantic dividend yield of 8.5% through to the close of 2020, a figure that blows Lloyds’ forward yield just above 5% clean out of the water.
This isn’t the only metric in which it beats the Black Horse bank either. The homebuilder’s prospective P/E ratio of 7.9 times beats Lloyds’ figure of around 8.2 times and makes it better value for money (on paper, at least).
Like the Footsie lender, Crest Nicholson is also attuned to the health of the UK economy and saw sales dented by Brexit-related uncertainty over the past year, particularly so with its higher-priced properties. All things considered though, the outlook for the business is much stronger thanks to the size of the country’s homes shortage and the time it will take for this to be resolved.
This point has been underlined by more reassuring trading updates of late, including March’s in which Crest Nicholson said forward sales stood at £686m, up around 11%, and that the overall picture remained positive.
In particular, it said: “With employment levels at record highs, a wide range of available mortgages and a structural undersupply of new housing, we are confident in the long-term future of our core housing market.”
Room for upgrades? As Crest Nicholson commented, the challenges related to customer demand for its more expensive properties look likely to continue a while longer as the political and economic uncertainty in Britain continues.
I’m confident that the supportive lending conditions for first-time buyers, also helped by the government’s Help To Buy purchase scheme, should allow the business to overcome these problems.
And the steady stream of releases from the country’s other homebuilders, companies which also suffer from the same issues of cost inflation and flatter home price growth in the UK, reinforce my positive take. Taylor Wimpey (LON:TW) was the latest to chime in last week with news of strong forward sales and record-breaking sales rates. I’m certain it won’t be the last.
City analysts are yet to be convinced by Crest Nicholson’s prediction that revenues and volumes in 2019 will register at similar levels to those of last year. But I’m confident the company’s prediction will appear more and more legitimate as the months roll by and will prompt current earnings forecasts to be upgraded. So I’m expecting more share price gains in the not-too-distant future.
Royston Wild owns shares of Taylor Wimpey. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019