Investors seeking ‘safe as houses’ stocks needn’t look far to find brilliant income stocks for their ISAs: housebuilder Bellway (LSE: BWY) is a great buy for risk-averse persons, in my opinion.
It doesn’t matter that house price growth in the UK has more or less ground to a halt owing the intense political and economic uncertainties related to Brexit. By ramping up production rates, the FTSE 250 business continues to grind out solid profits growth. Latest financials showed revenues boomed 8% in the six months to July to £3.2bn, a result driven by surging volumes (up 5.8% year-on-year to 10,892 homes).
Broader homebuyer activity might be more subdued today, but a shocking shortage of new homes means that demand still continues to outstrip supply, keeping sales for the likes of Bellway moving merrily higher. It’s this resilience in the most difficult market conditions we’ve seen for decades which makes the builder such a low-risk stock selection.
What’s more, this robust earnings visibility means shareholders can be confident dividends will keep swelling and remain at generous levels too.
City analysts certainly think so, and are predicting a full-year dividend of 147.9p per share will be announced when preliminaries are unpacked on 15 October, up from 143p in the fiscal 2018. Most importantly, for the current year, they’re predicting a 155.3p payout, a figure which yields a terrific 4.8%.
And, like Bellway, this forward projection looks safe as houses as well. Not only is it covered 2.8 times over by anticipated earnings, comfortably above the widely-accepted security watermark of 2 times, but surging cash flows means the builder had a whopping £201m of net cash on the books as of July (more than double the levels seen 12 months earlier) to rely on.
Bellway, then, is a share I think can be expected to keep delivering corking shareholder returns for many years to come. And, furthermore, at current prices, it can be picked up for next to nothing, the firm currently trading on a forward P/E ratio of 7.4 times. It’s a stock I’d happily buy today and never sell.
Even bigger yields
Clipper Logistics (LSE: CLG) is another big dividend payer I reckon could make you a fortune by the time you retire. Why? Its exposure to e-commerce, where growth rates look set to keep booming in the decades ahead.
During the 12 months to April 2020, the business is expected to deliver a whopping 15% revenue increase (to £460.2m) because of surging online activity from its catalogue of big-hitting clients, from ASOS to Asda, and Halfords to Boohoo. Clipper continues to add customers at breakneck pace. Not just in the UK, but across Europe, there are blue-chips attracted to its expertise in important areas such as Click & Collect and returns management.
Unsurprisingly then, City analysts expect Clipper’s profits and dividends — which have already leapt 102% in the past five years — to keep swelling.
A 12p per share payout is estimated for fiscal 2020, up from 9.7p last time out, resulting in a giant 5.7% yield. And, on top of this, at current prices, the small-cap carries a rock-bottom corresponding P/E multiple of 10.2 times.
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Royston Wild has no position in any of the 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.