Bovis Homes Group (LSE: BVS) is a top dividend share I’d be happy to buy not just for 2020 but for the next decade and beyond too. The housebuilder’s share price has rocketed 250% since 2010 and there’s plenty of reason to expect more mouth-watering rises over the upcoming 10 years.
Much has been made of government failure to get Britain building in supporting home values, its target of creating 300,000 new homes each year by the middle of the next decade still appearing a result of misguided optimism. But less has been made of the impact that low interest rates are having on driving buyer demand and thus worsening the housing market’s whopping supply and demand imbalance.
Low interest rates set to stay
Indeed, some commentators believe that the wide availability of cheap money has been the deciding factor behind property prices rises in recent decades. A new report from the Bank of England, for example, suggests that “nearly all of the rise in average house prices relative to incomes [since 1985] can be seen as a result of a sustained, dramatic, and consistently unexpected, decline in real interest rates.”
The benchmark interest rate remains just half a percentage point above the record lows of 0.25% struck in the immediate aftermath of the summer 2016 European Union referendum, and the 0.5% level that dominated the 2010s. And with the risks of a no-deal Brexit to the domestic economy at the end of 2020 remaining elevated, it’s likely that the Bank of England may have to put the kibosh on any further hikes in the coming decade, if not pull them back towards (or even below) those all-time lows.
Big, big dividends
It’s no wonder that City analysts expect Bovis to follow up a predicted 10% earnings rise in 2019 with an even-better 22% bottom-line improvement in 2020.
The FTSE 250 firm is ramping up production rates in anticipation that market conditions will indeed remain positive, meaning that private sales rocketed 15% in the first six months of 2019 to 0.6 homes per site per week. And the recent acquisition of Linden Homes from Galliford Try for around £1.08bn underlines Bovis’s confidence that homebuyer activity will remain robust.
Along with expectations of meaty medium-term profits growth come broker predictions that dividends will keep sailing higher as well. Consequently, yields sit at a monster 7.5% and 7.8% for 2019 and 2020 respectively, readings that smash the forward average of 3.5% for the UK’s mid-caps to smithereens.
Throw a dirt-cheap forward P/E ratio of 10.1 times into the equation too and I reckon Bovis is a top buy today. The builder’s share price has boomed 60% since the turn of January, and while the rocketing home price growth of yesteryear may remain elusive, the company’s goal of supercharging output should still provide the foundation for more monster gains in the 2020s.
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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.