A logical first step when discussing what I would deem to be ‘safe as houses’ dividend stocks would be to look at the homebuilders.
London-centric specialists like The Berkeley Group is a little less attractive right now because of the weaker property market in the capital versus the rest of the country, trouble that City analysts expect to create some earnings turbulence in the medium term.
But I’m convinced that the likes of Berkeley remain exceptional long-term bets in spite of this trouble — London has been a top global destination for centuries and is unlikely to lose its crown any time soon, partly due to the historic homes shortage that has long plagued the city.
A national treasure But if you’re looking to avoid any sort of profits hiccups, and thus any disruption to possible dividend growth in the near term or beyond, then you might want to look at builders with a more diversified geographic footprint. Like Bovis Homes Group (LSE: LON:BVS), for example.
Sales at the company continue to spike in spite of Brexit wreaking havoc in the UK. It doesn’t matter that existing homeowners are holding back on listing their properties until the outlook becomes clearer: a plethora of lip-smacking mortgage products, strong employment levels, and a structural lack of housing, means that the market has remained remarkably resilient.
And this was laid bare by fresh Halifax housing market data showing property prices up 5.2% in the three months to May, representing the highest rate of annual growth since January 2017.
The electric home price growth of yesteryear may be at an end, but broadly speaking, home values keep on rising. Which begs the question: if the market can remain upright at a time when economic and political uncertainty is at unprecedented levels (at least in peace time), then what exactly can blow it over?
This underlines why I believe Bovis is a safe pair of hands in which to invest.
10%+ dividend yields! In this climate it’s not a surprise that Bovis tried to snap up the Linden Homes division of Galliford Try early last month, a move that would have bolstered its presence all over the UK still further. Okay, the proposal may have ultimately faltered, but given the robustness of the market and the vast amounts of cash the FTSE 250 firm chucks out, it’s a good bet to expect more developments on the M&A front sooner rather than later.
The broker community certainly expects Bovis to keep thriving in spite of Brexit uncertainty. In fact, they expect annual profits expansion at the builder to pick up from mid-single-digit percentages in 2019 to double-digits in 2020, projections that lay the groundwork for predictions of more dividend growth as well.
Current forecasts suggest that dividends of 102.2p per share are predicted for this year and 105.6p for 2020, up from 102p last year. And this means that dividends for this year and next sit at a show-stopping 10% and 10.4% respectively. If you’re seeking the guarantee of big dividends now and in the future I think it’s hard to look past Bovis. Therefore it’s a white-hot buy in my book.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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