One 8% yield and one 6% yield I’d buy and hold forever

Royston Wild looks at two brilliant dividend shares that could make you rich.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The scale of Britain’s homes shortage, allied with inadequate government action to boost the country’s housing stock, convinces me that Crest Nicholson Holdings (LSE: CRST) should remain a lucrative dividend share for many years to come.

And with the FTSE 250 constructor, like many of its London-quoted peers, having seen its share price dive in 2018 (and touch 16-month troughs just this week) I reckon now is a great time for dip buyers to grab a slice of the action.

Yields rising to 9%

Share pickers have been put off the housebuilders of late after a slew of industry data underlined the moderation in home price growth that really kicked off last year.

Declining property values are no great surprise given the chronic political and economic uncertainty that has put the rampant homes demand of yesteryear to the sword. But on the brighter side, homes demand remains broadly stable and the Bank of England announced last month that mortgage approvals recovered from the three-year troughs plumbed at the turn of the year to record the biggest month-on-month increase since April 2015 in February.

Ultra-attractive interest rates and the government’s Help To Buy scheme are helping to keep homes demand afloat, if nothing else. For the likes of Crest Nicholson, meanwhile, a lack of available properties entering the market is propelling demand for new-build homes ever higher and keeping revenues on a skywards trajectory.

City analysts are predicting that earnings at Crest Nicholson will continue to grow at a much shallower rate compared to the double-digit rises seen before the EU Referendum as slower demand and heavier costs across the construction industry weigh. Advances of 6% and 13% are forecast for the years to October 2018 and 2019 respectively.

Still, these robust figures are enough to underpin predictions of further dividend growth. And so the payout of 33p per share of fiscal 2017 is expected to rise to 35.7p this year and to 40.3p in the following period, resulting in large yields of 8% and 8.9% respectively.

And a mega-low forward P/E ratio of 6 times seals Crest Nicholson’s appealing investment case, in my opinion.

More gigantic yields

I feel those on the lookout for dirt-cheap dividend stocks also need to give Headlam Group (LSE: HEAD) a close look today.

Supported by an expected 6% earnings rise in 2018, the floor coverings giant is expected to raise the dividend to 27.1p per share from 24.8p last year, thus creating a mammoth 6.4% yield.

Moreover, the 4% profits advance forecast for next year leads to predictions of a 28.4p dividend, which in turn nudges the yield to 6.7%.

Despite its bright earnings outlook however, Headlam can be picked up on a forward P/E ratio of just 9.6 times. This is much too cheap given the waves it continues to make across Europe.

The small-cap saw like-for-like revenues in Europe rise 4.2% last year, speeding up from the 3.1% advance reported in 2016. And Headlam is still active on the M&A stage to continue grabbing custom on foreign shores, the business having made three acquisitions last year and more recently Netherlands-based Dersimo earlier in March. There’s plenty for growth and income seekers to get stuck into here.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »