£1k to invest? I think the future looks bright for this FTSE 250 growth stock

I think this FTSE 250 growth stock is a strong buy for 2020.

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After a spell of relatively dull performance, house prices have risen in every region of the UK for the first time in two years. A positive and more settled economic outlook, combined with the recent general election result, seem to have calmed buyers’ nerves. This caused house prices to increase by 2.2% in December 2019, up from 1.3% in November, according to the recent UK House Price Index report by HM Land Registry.

Inevitably, higher prices lead to an expansion in new house-building as construction and property developers react to the incentive and see an opportunity to make profit. This means that there has never been a better time to invest in the UK property market than right now!

All of this is fantastic news for the share price of Bellway (LSE: BWY), one of the UK’s largest residential property developers. The company, which is based in Newcastle upon Tyne, is spread across the UK and has been building quality homes for over 70 years. Its focus is on providing traditional family housing across their divisions outside of London and modern, attractive apartments within the London boroughs.

Bright future

Bellway performed exceptionally well throughout the year 2019, resulting in around a 50% increase in its share price. The company also recorded a staggering 8.6% increase in group revenue and a healthy 3.4% increase in profit for the year 2019. On average, each house was sold for £291,968, signalling a 2.5% increase on the previous year’s average. In 2020, figures can be expected to be superior owing to the recent increase in house prices and the favourable economic outlook.

In a recent trading update released in February 2020, Bellway reported a strong balance sheet and net cash of £4.6 million. Additionally, the company achieved a record first half volume output, with the completion of 5,321 new homes. That’s a rise of 6.3% over last year.

A modest price-to-earnings ratio of 9.81 and a dividend yield of 3.58%, at the time of writing, further sweeten the deal. What’s more, the dividend payout has consecutively increased over the last five years and is comfortably covered 2.91 times by its profits.

All things considered, the future looks bright for Bellway. The company recently reported that it has the financial and operational strength to further expand the divisional network, providing market conditions continue to remain supportive. This will see the company further strengthen its presence across the UK and reach the newer divisions that are still developing in operational capacity. 

The above are just a few of the reasons why I’m particularly bullish when it comes to this stock. So long as the positive economic outlook and favourable market conditions prevail, I believe Bellway’s share price is set to carry on increasing at an attractive rate to would-be investors. What’s more, the company’s sustainable growth strategy can be sure to act as a catalyst for further long-term growth, helping deliver favourable returns for shareholders.

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.

Matthew Dumigan does not own any shares in the stocks 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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