Regular readers will know of my absolute faith that London’s house-builders remain some of the best investments that money can buy.
I’m an owner of shares in Barratt Developments (LSE: BDEV), and haven’t for a split second considered selling out of the business in spite of trading conditions becoming the most difficult that they have been for decades.
Indeed, latest trading details from the construction colossus have reinforced my positive spin. Revenues growth has moderated from that of prior years as property price expansion has slowed — Barratt’s top line swelled 4.8% in the 12 months to June 2018 to £4.87bn, less than half of fiscal 2017’s sales growth of 9.8%. But pre-tax profit still jumped by an impressive 9.2% to £835m.
The FTSE 100 firm has battened down the hatches in response to more muted homebuyer demand, and through a variety of initiatives, it improved its operating margin by 50 basis points to 17.7% last year. Promisingly, Barratt’s scheme to bolster efficiency and cut costs still has a lot of fuel left in the tank too.
As safe as houses
This is not to say that sales of Barratt’s new-builds are set to fall off a cliff. Far from it, in fact, the business commenting that “market conditions remain good with a wide availability of attractive mortgage finance, which, alongside Help to Buy, continues to support robust consumer demand.”
This underlines why brokers are positive earnings can keep on rising at Barratt, an extra 3% advance anticipated for fiscal 2019. There are two extra positives to take from this reading: firstly it means that the house-builder sports a dirt-cheap valuation, Barratt changing hands on a forward P/E ratio of 8 times.
And secondly it gives rise to predictions of fresh dividend expansion as well, the City currently predicting a payout of 45p. This means that the yield stands at a smashing 8.2%, more than double the current main market average.
A costly but cracking dividend star
Share pickers hitting the FTSE 100 for cut-price dividend corkers may give St James’s Place (LSE: STJ) short shrift, the company trading on a prospective P/E ratio of 24.2 times. I reckon this could be a mistake, though, and recent trading numbers have reinforced my faith in the asset manager.
In the six months to June net inflows jumped 21% to £5.2bn, a result that helped total funds under management grow to £96.6bn as of the close of the period, from £83m 12 months prior. As St James’s Place noted, “we continue to see a growing demand for highly personalised and trusted face-to-face financial advice and service.” And as the business also commented, there remains a terrific shortage of experts in the financial advice arena in the UK with the company investing heavily to exploit this.
This sunny outlook encouraged St James’s Place to hike the interim dividend 20% to 18.49p per share, and City analysts expect the full-year reward to clock in at 49.7p per share, resulting in a 4.5% yield. In addition, an anticipated 57.2p dividend for next year drives the yield to 5.2%.
The number crunchers may be forecasting a 17% earnings drop for 2017, but I am convinced the company’s long-term outlook remains robust.
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Royston Wild owns shares in Barratt Developments. 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.