I am a shareholder in two of the UK’s largest housebuilders, my stakes in Barratt Developments and Taylor Wimpey underlining my faith in the strength of the housing market.
I last snapped up shares in the businesses almost exactly a year after 2016’s historic Brexit vote as predictions of a painful collapse in British property prices failed to materialise. I was always sceptical over such a scenario actually occurring given the scale of the supply/demand imbalance in the homes market, but the robustness of market conditions (as illustrated by the relentless flow of good trading updates from across the industry) did take me a little by surprise.
In this environment Crest Nicholson’s (LSE: CRST) share price advanced 20% during the course of 2017, although the northwards path was far from smooth. Despite these heady gains, I believe the Surrey business remains an overlooked gem that should provide brilliant returns now and in the years to come.
Affirming the bright outlook for Crest Nicholson and its peers, chief executive Stephen Stone commented back in November that “the new-build housing market continues to be robust and Crest Nicholson remains well positioned to grow volumes and deliver the homes that the UK needs.”
Stone noted that the business “carries positive momentum into 2018,” the FTSE 250 firm recording a 13.6% uptick in forward sales as of the end of October, at £391.4m, with favourable lending conditions helping to drive demand for the company’s new-builds.
So City analysts are predicting that earnings at Crest Nicholson will pick up steam in the years ahead. A projected 5% rise in the year to October 2017 is expected to rev to 11% and 15% in fiscal 2018 and 2019 respectively. Therefore dividends are anticipated to keep heading through the roof as well.
The Square Mile says that the estimated 33.2p per share dividend for last year will move to 36.7p in fiscal 2018 and to 42.2p next year, meaning that the business carries mighty yields of 7.1% and 8.1% for these respective periods.
Given its bright earnings and dividend prospects, not to mention its eye-popping value — the construction colossus sports a forward P/E multiple of just 7.2 times — I reckon Crest Nicholson is a terrific buy today.
Dividends rising again
Begbies Traynor Group (LSE: BEG) is another share that could thrive in 2018 and beyond as the impact of a slowing domestic economy could potentially drive plenty of businesses into insolvency.
While this is not a cheery thought, it does at least provide share pickers with a compelling investment opportunity. Indeed, earnings at the AIM-listed business are expected to jump 10% and 11% in the years to April 2018 and 2019 respectively in this environment.
These rosy predictions are expected to drive Begbies Traynor’s dividends skywards again as well, following many years of payout stagnation. The enduring 2.2p per share reward is predicted to finally rise to 2.4p this year, resulting in a chunky 3.3% yield. And this moves to 3.5% for next year thanks to a predicted 2.5p payment.
The business hiked the interim dividend by 17% last month in the first rise since 2011 on the back of its solid profit outlook and impressive cash generation. In my opinion Begbies Traynor is an interesting share selection worthy of attention despite its slightly toppy forward P/E ratio of 19.9 times.