5.7% dividend yields! One of the best dividend stocks to buy

I’m hunting for the best dividend stocks to buy for my portfolio. I think this big-yielding UK share could prove to be a wealth-builder for years to come.

| More on:

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.

Hand holding pound notes

Image source: Getty Images.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

I’m looking for the best dividend stocks to buy today. And right now, I’m consider increasing my exposure to Britain’s housebuilding sector. Predictions of a sharp market slowdown remain way off the mark, meaning that these sorts of UK shares remain top buys, in my book.

Research from Stipendium last week added to the wealth of positive data on the white-hot homes market. This showed the average house price for first-time buyers reach £228,627. That’s up 17% (or £33,000) from pre-pandemic levels.

There’s a danger that rising interest rates could cause homes demand to cool sharply later in 2022. The growing cost of living crisis could also hit the market hard. However, it’s my view that these dangers are baked into the share price of most housebuilding shares.

A dirt-cheap dividend stock to buy

Take Bellway (LSE: BWY) as an example. This low-cost stock trades on a forward price-to-earnings (P/E) ratio of just 6.3 times. A figure below 10 suggests that a share could be undervalued, relative to its growth prospects, and leaves a particularly-wide margin for error for profits to miss.

Latest trading news from Bellway shows how strongly the UK’s housing market remains. In late March, the business said its revenues and overall reservation rate had risen 3.5% and 5.8% year-on-year respectively in the six months to January.

It also said it remains on course to sell 11,100 homes this financial year (to July). This would represent a 10% rise from last year’s levels.

Profits growth to slow?

City analysts believe that earnings growth at Bellway will slow over the medium term. They think profits will soar an impressive 28% year-on-year in this financial year. And they also predict growth will slow to just 2% in fiscal 2023.

Such projections might deter investors seeking to load up on growth shares. But expectations of further earnings growth means Bellway might still be considered one of the best dividend stocks to buy today.

5%+ dividend yields!

Analysts think Bellway will lift the full-year dividend to 133p per share this year, from 117.5p in financial 2021. They believe the total reward will increase to 144.3p in fiscal 2023 too.

Consequently, yields at Bellway sit at 5.2% and 5.7% for financial 2022 and 2023 respectively. These readings beat the broader average of around 3.5% for UK shares by a very decent margin.

The good news is that it seems Bellway will be able to comfortably make these dividend payments too. Estimated dividends are covered between 2.9 times and 3.1 times by anticipated earnings over the next two years. This is well above the safety watermark of 2 times, and more.

The builder also has a solid balance sheet to help it continue making generous dividend payments (Bellway had net cash of £195.8m on its books, as of January). I think this dividend stock could be too good to miss. Particularly at current prices.


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.

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.

More on Investing Articles

High flying easyJet women bring daughters to work to inspire next generation of women in STEM
Investing Articles

In 12 months, a £10,000 investment in easyJet shares could become…

easyJet shares have plunged in value following a profit warning on Thursday (17 July). Can the FTSE 100 travel share…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

This S&P 500 blue chip looks far too cheap to me at $183!

Our writer picks out one high-quality S&P 500 stock that is currently the cheapest among the 'Magnificent 7' group of…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Down 23% today! This one’s stinking out my Stocks and Shares ISA

Our writer's wondering what to do with a problem named Ashtead Technology (LON:AT.) in his Stocks and Shares ISA portfolio.

Read more »

Two male friends are out in Tynemouth, North East UK. They are walking on a sidewalk and pushing their baby sons in strollers. They are wearing warm clothing.
Investing Articles

Down over 20%, should I dump this FTSE 100 dividend stock?

Our writer has been loving the passive income this dividend stock has been throwing off. But does the big share…

Read more »

Businesswoman calculating finances in an office
Investing Articles

I’ve just bought this FTSE share…

Our writer explains the thought process that led to him buying this FTSE share. One that’s likely to do well…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Just over £5 now, easyJet’s share price looks cheap to me anywhere under £13.84

easyJet’s share price has dropped recently, which could mean the business is worth less than before. Conversely, it could mean…

Read more »

Trader on video call from his home office
Investing Articles

36% under ‘fair value’ and forecast annual earnings growth of 6%, should investors consider this FTSE 250 stock?  

This FTSE 250 firm is a leader in a growing sector and has secured several new sites to drive its…

Read more »

Portrait of a boy with the map of the world painted on his face.
Investing Articles

3 UK shares that have recently become takeover targets

Mark Hartley examines why these three UK shares have become takeover targets and could be bought out by rivals in…

Read more »