A FTSE 100 dividend share that could soar after Labour’s general election win

A large dividend yield and predictions of growing payouts could make this FTSE 100 share a brilliant buy for long-term passive income.

| 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.

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.

A huge Parliamentary majority means Labour has significant scope to try to deliver its manifesto pledges. WIth it, the fortunes of a great many UK growth and dividend shares could receive an enormous lift.

Kate Leaman, chief market analyst at AvaTrade, notes that “from healthcare and the environment to the economy, policy changes by the new Labour government are set to impact all aspects of life“.

She adds, too, that “with Labour’s victory, changes in the financial markets are also anticipated“.

But which UK shares could receive a substantial boost? Here’s one from the FTSE 100 that could be a big winner in the years ahead.

One possible winner

Sectors such as banking, homebuilding food and retail could witness gains due to Labour’s policies aimed at political stability, affordable housing, and encouraging private sector investments.

Kate Leaman, AvaTrade

Housebuilders like Barratt Developments (LSE:BDEV) picked up steam in the days before last week’s election.

Why? With Labour retaining its huge lead in the pre-vote polls, investors anticipated a large pick up in home construction. The red party made boosting home construction a major part of its election manifesto.

Today (8 July), Rachel Reeves — the new Chancellor of the Exchequer — affirmed the government’s plans to supercharge homebuilding, with the creation of 1.5m new homes by 2029.

To meet this goal, the government said it will reform the national planning policy framework. It has also vowed “to accelerate stalled housing sites in our country“. This is great news for the likes of Barratt, whose construction plans (and therefore profitability) have long been dogged by red tape.

Yet government pledges are never set in stone, of course. The previous Conservative adminstration also pledged 300,000 new homes a year, but was forced to ditch plans as the realities of the tough planning environment became apparent.

A similar failure by Labour could have huge negative implications for housebuilders’ earnings.

Growth returning

Having said that, the long-term outlook for the likes of Barratt remains positive, in my opinion. And that would have been the case regardless of who won the election. This is thanks to Britain’s rapidly growing population and the impact it is having on homes demand.

Higher interest rates have impacted the homebuilders more recently. But profits are tipped to snap back from this year as the Bank of England (likely) begins cutting rates.

Earnings are tipped to increase 22% in this financial year (to June 2025). And so Barratt shares are trading on a forward price-to-earnings growth (PEG) ratio of 0.7.

There’s no guarantee that interest rates will fall markedly (or even at all) from current levels. But I believe this threat to profits is baked into the housebuilder’s cheap valuation.

Any reading below one indicates that a stock is undervalued.

Rising dividends

A return to earnings growth — Barratt’s bottom-line is tipped to surge 23% in financial 2026, too — means that dividends are also expected to rise strongly following last year’s predicted cut.

As a consequence, the dividend yield on Barratt shares also rises sharply above the FTSE 100 average of 3.5%. This is shown in the table below.

Financial yearPredicted dividend (per share)Dividend yield
202415p3%
202518.9p3.7%
202623.3p4.6%

For investors seeking market-beating dividends, Barratt shares could be a great share to consider as a long-term holding.

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 positions in Barratt Developments Plc. 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

Investing For Beginners

Investing this much from 35 could generate a £1m UK stocks portfolio by retirement

Jon Smith explains how starting to invest in UK stocks by their mid-thirties can provide an investor with the potential…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

A 9.2% yield but down 9% despite a strong 2024, is it time for me to buy more of this passive income superstar?

This top-tier financial stock has an extremely high yield that can generate life-changing passive income over time from a much…

Read more »

Investing Articles

Legal & General has supercharged second income potential with a forecast yield of 9%!

Harvey Jones says investors looking for a second income can get a sky-high yield today from FTSE 100 insurer Legal…

Read more »

Young Caucasian woman with pink her studying from her laptop screen
Investing Articles

Here’s the dividend forecast for Lloyds shares

Dr James Fox walks through the dividend forecast for one of the most popular stocks on the FTSE 100. Despite…

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

Hunting for passive income? Here’s a top FTSE 100 dividend growth share to consider!

Buying low-yielding shares like this FTSE dividend growth hero can be a great way to make a long-term passive income.

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

£10,000 invested in Tesla stock 2 weeks before the US election is now worth…

The US election represented a major turning point for Tesla stock, taking millions of shareholders on one hell of a…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

This FTSE 250 trust is a high-risk, potentially-high-reward play

Typically, trusts offer a degree of stability due to their diversified nature. Dr James Fox explains why this FTSE 250…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Up 47% from its 12-month low, is there any value left in Lloyds’ share price?

Lloyds’ share price has risen substantially over the past year, but it may still have significant value left in it.…

Read more »