In normal times, Belvoir Group (LSE: BLV) could be considered a wise place for ISA investors to lock their money up. The property giant has grown profits every year for almost a quarter of a century.
And following the recent stock market crash, it looks very attractively priced. Not only does it carry a forward price-to-earnings (P/E) multiple of around 10 times, the AIM stock also boasts a 5.3% dividend yield for 2020.
Belvoir is a share loaded with near-term risk though. It’s why the lettings and estate agent has decided to axe last year’s final dividend in recent weeks. With agencies shutting up shop amid the UK-wide lockdown, the property market has fallen off a cliff. According to estate agency Knight Frank the number of house sales will tumble 38% year-on-year in 2020, to 526,000.
It didn’t give a forecast for 2021. But with economic conditions expected to implode, a prolonged and painful drop in the housing market is clearly quite possible. For these reasons I’m happy to ignore Belvoir’s attractive paper valuations and go ISA shopping elsewhere.
A better ISA buy?
Could Kingfisher (LSE: KGF) prove a wiser place to invest your ISA cash? Sure, it also scrapped last year’s final dividend in response to the coronavirus breakout. However, City forecasts for the current financial year (to January 2021) result in a gigantic 6% dividend yield. The DIY colossus carries a mega-low prospective P/E ratio of 10 times too.
The FTSE 100 retailer has been in trouble for a long, long time. Tough retail conditions in the UK and France, allied with a botched transformation plan, have caused like-for-like sales to plummet in recent years. Admittedly though, trading has been a bit stronger of late. Underlying revenues dropped 1.5% in the last fiscal year. But in the final quarter, corresponding turnover grew 1.7% year-on-year.
Steer clear of the pain train!
Can Kingfisher keep this positive momentum going? It’d take a braver ISA investor than me to suggest so, given the economic catastrophe that hovers above all of its markets. It’s likely that consumer spending on paintbrushes, drills and garden furniture will topple as GDP falls off a cliff. The aforementioned collapse in the housing market will especially hit the Footsie firm hard.
In that Knight Frank study, it’s estimated spending on DIY and renovations will topple by a staggering £7.9bn in 2020. The estate agency isn’t alone in predicting tough times for the likes of Kingfisher though. In a recent report, Alvarez & Marsal predicted UK sales of DIY and gardening products will drop 2.9% this year. The business consultancy had previously been expecting growth of 1.8%.
No wonder Kingfisher’s share price has dropped 34% during the past two months. Belvoir’s drop has been even worse though, plummeting an eye-watering 42%. It’s difficult to envisage either of these two dividend stocks rebounding in value any time soon either.
In my opinion, both shares carry too much risk for ISA investors today. I think they should be avoided.
