There’s no denying that UK-listed housebuilders have had a great run since the end of the financial crisis, with all of our leading developers enjoying spectacular share price gains over the past nine years or so.
6,223% return
Taylor Wimpey (LSE: TW) has got to be one of my favourites. Since the latter part of 2008, this FTSE 100 housebuilder has seen the value of its shares rocket from just 3.34p per share to recent highs of 211.2p. No need to reach for the calculator, I’ll tell you that’s an increase of 6,223%. Just another example of investor patience paying off.
So it’s fair to say the Buckinghamshire-based residential developer has been doing rather well, as has its shareholders. But what does the future hold for this £6.6bn industry giant?
Well, if this morning’s trading update is anything to go by, the outlook appears very rosy indeed. For the year to the end of December 2017, the group achieved a 5% increase in total home completions to 14,541, of which 2,809 were affordable homes (including joint ventures), equating to almost a fifth of total completions. The group ended 2017 with a very healthy order book valued at £1.6bn (excluding joint ventures), representing 7,136 homes, with a net cash position of £512m.
Generous 7.1% yield
Against a backdrop of a positive housing market, demand remains strong, with customers continuing to benefit from a wide range of mortgage products, low interest rates, and the government’s Help to Buy scheme.
Final results aren’t due to be officially released until 28 February, but City analysts are forecasting a total dividend payout of 13.55p per share for the year, rising to 15.05p for 2018. At current levels, this equates to a rather generous 7.1% yield, making Taylor Wimpey a tempting income play that’s simply too hot to ignore.
Demand for affordable housing
Meanwhile, another UK housebuilder that’s been delivering substantial shareholder returns since the start of the current bull run is Bellway (LSE: BWY). In fact, the FTSE 250-listed developer has managed to outperform its larger peer over the past 12 months with a 38% rise in its share price, compared to a 15% gain for Taylor Wimpey.
Of course, that doesn’t necessarily mean it’s a better investment, but just confirms that the uncertainties caused by Brexit haven’t yet managed to dent investors’ faith in the future demand for affordable housing in this country.
Bargain valuation
Indeed, in its last set of full-year results, the Newcastle-based residential property developer reported another year of volume growth, with the number of completions rising by 10.6% to a record 9,644 homes, significantly contributing to the increase in operating profit, which rose 16.2% to £571.6m.
Despite its soaring share price Bellway still trades on a bargain valuation of just nine times forward earnings for the year to July, and offers a rising dividend payout with a yield just shy of 4%. What’s not to like about that.
