The Motley Fool

Have £2k to spend? I like this cheap FTSE 100 dividend stock with yields of 7.5%

The FTSE 100’s homebuilders are stocks that I’ve championed as some of the most compelling out there.

But the impact of Brexit on the likes of Barratt Developments (LSE: BDEV) shouldn’t be swept under the rug. After all, the stunning home price increases of recent decades have ground to a halt because of the uncertainty over how, and when, the UK will pull out the European Union.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

That’s not to say, though, that Barratt and its peers can’t keep grinding out earnings growth year after year, albeit at a slower pace than usual. And this means that dividends should remain on the generous side.

Brexit bounce?

Indeed, City analysts are expecting payouts of 45.4p and 46.1p per share for this fiscal year and next, up from 43.8p last year and underpinned by expectations that profits will rise by low-single-digit percentages through this period. Consequently the builder boasts giant yields of 7.5% for this year and 7.6% for fiscal 2020.

Barratt looks good to meet these forecasts because of the sea of great mortgage products that are encouraging first-time buyers to take the plunge, as well as the lack of existing properties entering the sales market as homeowners hold fire on account of the muddy political and economic outlook, exacerbating the importance of the new-build market.

In fact, or at least according to Rightmove, the latest developments around Brexit could actually help the housing market over the spring and summer months.

The online property advertiser says that it’s quite possible that the homes market could receive a boost on the back of the recent Article 50 extension lasting until October 31 — according to Rightmove director Miles Shipside: “This extension could give hesitating home movers encouragement that there is now a window of relative certainty in uncertain timesWe are not anticipating an activity surge, but maybe a wave of relief that releases some pent-up demand to take advantage of static property prices and cheap fixed-rate mortgages.”

Traffic data from Rightmove certainly illustrates the strength of this frustrated demand that exists in the system, the 145m site visits logged in March making last month its busiest ever month. Indeed, the market remains so strong that average home values on Rightmove actually ticked 1.1% higher in March from the previous month, the largest rise for this time of year since 2016.

A cracking keeper

Look, I’m not pretending that Barratt and its peers aren’t without their risks. As well as the home sales uncertainty created by Brexit, a rise in material costs on top of a shortage of skilled labour — a problem that could also worsen should punishing immigration changes affect the flow of foreign workers — is also clouding the company’s profits possibilities in the near term and beyond.

All things considered, however, the environment should remain ripe enough for this Footsie firm and its rivals to continue generating solid-enough earnings growth in the years ahead. It’s why I bought the share in recent years and plan to hold it long into the future.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Royston Wild owns shares of 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.