I think these unloved UK dividend stocks could well be brilliant buys for next month.
Springfield Properties
Scottish housebuilder Springfield Properties (LSE:SPR) has seen its share price sink 40% during the past year.
Like most of its industry peers, Springfield has dropped as tough economic conditions and interest rate rises have sapped demand for new homes. The prospect of further Bank of England action amid ‘sticky’ high inflation remains a threat to the business in 2023 too.
Yet the resilience of the housebuilding industry leads me to consider adding the beaten-down builder to my portfolio today. I think earnings and dividend forecasts could be upgraded, prompting a strong share price rebound.
Taylor Wimpey is the latest major homebuilder to say that the recovery in buyer interest continues to gain momentum. On Thursday it announced its weekly net private sales rate between 1 January and 23 April came in at 0.75 per week. This was up from the 0.62 recorded between New Year’s Day and 26 February.
Springfield Properties is tipped to reduce the annual dividend 6.2p per share to 4.4p in this financial year (to May). But as market conditions likely improve, City analysts think the total reward will rise to 5.7p in fiscal 2024.
This means the builder’s healthy 5.2% dividend yield for the current 12 months rises to 6.8% for next year.
I think Springfield is a top income stock to buy and hold for the long haul. A weak pipeline of housing developments mean that Britain’s homes crunch should persist, keeping property prices moving steadily higher.
And the Scottish business remains committed to expanding to capitalise on this trend. Recent acquisitions include premium housebuilder Mactaggart & Mickel last summer and timber frame producer Timber Systems.
Residential Secure Income
Staying with the property theme, I believe investing in Residential Secure Income (LSE:RESI) is a good idea.
The soaring cost of renting a home is one reason why buyer demand at the housebuilders is picking up. Latest government statistics showed private rents in the UK rose 4.7% on average in the year to February. This was up from 4.4% in the 12 months to January.
Rents are rising even more strongly at Residential Secure Income too. This is thanks to its focus on the particularly strong family homes sector. Rents here leapt 5.3% in the three months to December.
Just like in the home purchase market, the supply/demand imbalance across the rentals segment looks set to endure too. A growing exodus of buy-to-let investors is making this worse.
Like at Springfield Properties, profits at Residential Secure Income are being affected by elevated levels of build cost inflation. But on balance, I still expect earnings here to rise strongly in the years ahead.
Today, the real estate investment trust (REIT) carries a meaty 7.8% dividend yield for the year to September. I’d use recent share price weakness here as an opportunity to buy. Its shares have fallen 38% during the past 12 months.
