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ISA alert! A 5%-yielding FTSE 250 stock I’d buy with my last £2k (and never sell)

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Banging the drum for the housebuilders is something that I find myself doing on a regular basis.

In my opinion they are some of the most attractive shares out there. Brilliant value, big dividend yields, and because Britain still isn’t building homes at the rate it needs, firms which carry a very impressive, long-term growth outlook.

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Take Bellway (LSE: BWY), for example. Tough conditions in the broader housing market mean that the breathtaking annual earnings rises of recent years are predicted, by City analysts at least, to come to a skidding halt — the bottom line is expected to swell 4% in both 2019 and 2020. I don’t consider this to be a negative. In fact, given that Brexit means that the housing market is at its weakest for more than a decade, I reckon these projections are testament to the FTSE 250 firm’s splendid defensive qualities.

Great numbers

Bellway’s brilliant resilience was again revealed in half-year results unpacked this week. It saw revenues rising more than 12% in the six months to January, to £1.49bn, a result that drove propelled pre-tax profit almost 9% higher to £313.9m.

The Newcastle business booked completions of 5,007 homes in the period, up from 4,741 a year earlier, though higher volumes were not the whole story. Whilst home price growth is dragging in many parts of the country, this is not so in the territories in which Bellway operates with the average selling price of the firm’s new-builds rising 7% year-on-year to £293,832.

Chief executive Jason Honeyman was quick to laud the “positive” state of the UK new-build market, and in particular celebrated the “high employment, good access to affordable mortgage finance and the continued availability of Help to Buy” that continues to support buyer demand.

And why wouldn’t he be so upbeat? Sales at Bellway are going from strength to strength, and in the six weeks since February 1, it booked 259 reservations per week, up from 248 in the corresponding period last year. It’s no surprise that the business is taking steps to ramp up build rates, with up to 500 extra new-builds scheduled to be put up in fiscal 2019, for instance.

An undervalued dividend hero

Bellway’s share price may have bumped higher following the release, but not by much, showing that it continues to be underestimated by the market (at least in my humble opinion).

It’s one of many housebuilders that continue to thrive and release upbeat trading releases time and again, showing that the new homes sector remains solid despite ongoing fears over Brexit. This robustness isn’t reflected in the company’s dirt-cheap forward P/E ratio of 7 times, in my opinion. I consider Bellway to be a share whose profits can continue to soar higher well into the next decade at least, given the length of time it’ll likely take for the UK’s home shortage to be resolved. And for this reason, I think it’s worthy of last-minute inclusion in your Stocks and Shares ISA.

One final thing: predictions of further profits growth mean that dividends are expecting to keep rising, too. And this means yields for this year and next sit at a huge 4.8% and 5% respectively.

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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.

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