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Shareholders of residential property developer Crest Nicholson (LSE: CRST) have so far enjoyed a pretty good ride since the company relisted on the London Stock Exchange in early 2013. The share price has soared from its 220p IPO price to the highs of 636.5p achieved earlier this year. But guess what, I’m not recommending the firm as an out-and-out growth stock. Want to know why?

Economic uncertainty

Firstly, let’s not forgot how well London-listed housebuilders have performed over the past few years, with most companies delivering double-digit earnings growth year-in, year-out almost without exception. But as the saying goes, all good things must come to an end, and the current environment of political and economic uncertainty has knocked confidence in the sector with much slower rates of growth now being forecast for the medium term.

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So, does all this uncertainty mean that housebuilders such as Crest Nicholson are no longer such good investments? No it doesn’t, in my view. Just a quick glance at dividend payouts over the past few years will demonstrate how much the company is committed to rewarding its shareholders. Dividends have grown from just 6.5p per share in 2013 to last year’s huge full-year payout of 27.6p. But that’s not all. Our friends in The City expect this year’s payouts to go even further, with consensus estimates suggesting dividends amounting to 34.05p per share, resulting in a massive prospective yield of 6.5%.

Artificially inflated?

As we regularly point out on The Motley Fool, a sizeable dividend yield doesn’t necessarily make a good investment. Sometimes the numbers don’t tell the full story, and a yield can be artificially inflated after a share price collapse as a result of deteriorating fundamentals. So we should always check whether such high yields can realistically be achieved and are indeed affordable and sustainable.

In the case of Crest Nicholson, dividends are expected to be covered twice-over by predicted earnings, and therefore should prove to be reasonably safe and continue to grow at a healthy rate. Furthermore, the recent pull-back in the share price provides a great entry point for new investors with a P/E ratio of just eight low enough to tempt bargain hunters too.

My big fat juicy dividend

If Crest Nicholson’s chunky dividend has got you interested in the housebuilding sector, then my next offering will be the stuff of dreams. Much like its FTSE 250 counterpart, Galliford Try (LSE: GFRD) has also been enjoying a very prosperous few years of profitable growth.

The Uxbridge-based residential property developer hasn’t been afraid to shell out the cash when it comes to distributing its profits either. Dividend payouts have soared from just 30p per share in 2012 to the 82p it paid out to shareholders last year.

City analysts are expecting the dividend growth to continue at a blistering pace, with a 94.7p full-year payout predicted for the fiscal year just ended June 2017, and a further increase to 100.86p for the current financial year. The resulting numbers speak for themselves. A big fat juicy dividend yielding 8.7%, covered two times by forecast earnings.

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Bilaal Mohamed has no position in any 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.

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