The Motley Fool

£1,000 to invest? I’d buy this FTSE 250 dividend stock right now

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.

One pound coin
Image source: Getty Images.

I was surprised to see the Bellway (LSE: BWY) share price dip a little on Thursday after the company told us it expects to see housing revenue rise more than 8% to almost £3.2bn for the full year. That’s driven by an expected 5.7% rise in completions, from 10,307 in 2018 to 10,892 this year, hitting a record for the firm.

Pre-tax profit should be in line with market expectations, while Bellway’s operating margin should continue “to moderate towards a more normalised level.” There was net cash on the books of £201m at 31 July, up from £99m a year ago, and a forward order book of 4,878 homes shows no indication of any slowing in demand.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Growth and dividends

Chief executive Jason Honeyman reckons “Bellway is well placed to continue its long-term growth strategy,” and the markets seem to agree. Although the rapid earnings growth of recent years is inevitably slowing, there’s still a 3% rise on the cards for this year together with a predicted dividend of 5.1% that would be three-times covered. And that dividend is progressive, and will have almost doubled in five years if 2019 forecasts prove accurate.

With the shares on a forward P/E of well under seven, my big question is why investors aren’t rushing to fill their boots? The malaise that’s depressing the whole housebuilding sector continues to mystify me, and its afflicting the biggest companies too — even FTSE 100 giant Taylor Wimpey can command a P/E of only 7.7 these days.

Cooling in the property market, Brexit, and all that won’t change the fact that we’re deep in a chronic housing shortage. I still think the market has got the valuations of housebuilders badly wrong, and Bellway is on my buy list.


I was less impressed by what I saw in first-half results from TI Fluid Systems (LSE: TIFS) on Thursday, and the share price dropped 13% in response.

The company, operating in the unglamorous-sounding business of automotive fluid storage, carrying and delivery systems, reported a challenging global automotive market. That led to a 3.3% fall in revenue and an 18% drop in adjusted EPS. Adjusted free cash flow fell by 21.5%.

The firm said it expects its full-year adjusted EBIT margin to be anywhere from in line with or slightly weaker than the first-half figure, which came in at 10.1% (down from 11.4% at the same point last year). It added that free cash flow should come in behind 2018’s level.

That’s clearly disappointed investors who had been looking at forecasts for a 6% rise in full-year EPS and a 12% hike to the dividend, though the interim dividend was at least maintained at 3.02 cents per share.

Time to buy?

My thoughts now are that today’s share price fall could be an overreaction and might just have provided a nice buying opportunity. Prior to this first-half hiccup, TI Fluid Systems looked to be an attractive dividend stock, and I really don’t think much has changed.

Current forecasts suggest dividend yields of 4.3% this year followed by 4.6% next, and they’d be close to 3.5 times covered by earnings. That’s a pretty wide safety margin, and I don’t see any reason why short-term market toughness should require a cut.

My only concern is net debt, which has reached €854m. That’s 1.7 times annualised EBITDA, and for me that takes some of the shine off the low valuation.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Alan Oscroft 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.