For me, Barratt Developments (LSE:BDEV) represents one of the best UK shares to buy today. Housebuilders have underperformed in 2022 amid concerns of interest rate rises, increased supply chain costs and even a cooling of the property market, but it’s also a good place for me to look for bargains and attractive dividend yields.
Personally, I’m always on the lookout for shares offering passive income opportunities via dividend payments. These shares are a core part of my diverse portfolio, and provide me with a steady source of revenue without expending time and effort.
This is why I’ve just bought a limited number of shares in Barratt Developments. The firm is currently offering an attractive 5.4% dividend yield and is trading at a 25% discount compared to this time last year, making it an appealing opportunity for me hunting a passive income bargain.
Barratt Developments has a strong record of delivering attractive dividends. The firm has paid out yields above 4% for each of the last five years, with the exception of 2020 when the pandemic hit construction companies hard.
Moreover, the Leicestershire-headquartered firm has also maintained a healthy dividend coverage ratio in recent years. In 2021, this dropped to 2.21, lower than the years preceding the pandemic but still a healthy figure. Dividend coverage refers to the number of times a firm can pay the stated dividend from net income.
Barratt’s recent share price collapse also belies some positive performance data. The firm posted a pre-tax profit of £812.2m in 2021, up from £491.8m in 2020. Last year’s profits, buoyed by a strong UK property market, were comparable with pre-pandemic performance.
It’s worth noting that other housebuilders, including Crest Nicholson, Taylor Wimpey and Vistry Group, are all offering attractive dividend yields on the back of a strong property market and soaring house prices.
However, like Barratt, these homebuilders are also trading at a discount amid general volatility triggered by Putin’s invasion of Ukraine, but also a mixed forecast for the property sector.
Barratt will need to navigate more inflationary pressure on building materials as well as labour in 2022, while there is broader concern that further interest rate rises will dampen demand for new homes.
The firm’s share price has also been impacted by the government’s announcement that the sector will have to pay up to reclad thousands of buildings that were built using unsafe cladding. It is understood that firms will have to come up with a fully funded action plan before the end of March.
The government had suggested the industry will need to stump up £4bn. This figure has been disputed by the industry and, according to PricewaterhouseCoopers analysis, quoted by The Telegraph on Sunday, the figure could be less than £1bn.
Despite these headwinds, the housing market continues to look strong despite the recent rate rise and the cost-of-living crisis. Last week, Halifax reiterated that house prices were currently rising at their fastest rate in 15 years.
