The Motley Fool

Are these 6% dividend yields brilliant ISA buys, or should you invest in buy-to-let?

There’s been a lot of talk in the papers about booming buy-to-let rents of late. HomeLet was the latest to talk about soaring tenant costs this week, and it might not be the last.

But I’d urge anyone to think carefully before investing in buy-to-let as booming costs tend to offset the benefit of rising revenues for many landlords. There’s a reason why UK Finance data shows the number of mortgage approvals for buy-to-let purchase dropped 4.5% in November: investors continued to give the rentals market the cold shoulder.

Sign up for FREE issues of The Motley Fool Collective. Do you want straightforward views on what’s happening with the stock market, direct to your inbox? Help yourself with our FREE email newsletter designed to help you protect and grow your portfolio. Click here to get started now — it’s FREE!

A better property play

Those seeking a slice of the UK property market would be much better off buying one of the housebuilders. And this is advice that I myself have been happy to act upon, Barratt Developments (LSE: BDEV) being one of my longest-held share investments.

Recent robust trading releases from the FTSE 100 firm’s rivals have underlined the strength of the housing market today. Things could get even better should the Bank of England cut interest rates, as many are now expecting.

Royal Institution of Chartered Surveyors (RICS) data today suggests that the market is already improving. According to the body, “the UK housing market has seen a lift in sentiment” since last month’s general election. And some 31% of respondents to RICS’s survey expect transactions to rise over the next three months.

City analysts expect earnings at Barratt to dip 1% in the current fiscal year (to June 2020). But in the wake of recent data, I reckon estimates could be significantly upgraded. In my opinion, the housebuilder’s forward P/E ratio of 10.8 times and corresponding 6% dividend yield make it a very attractive share to load up on today.

Motoring on

I think individuals seeking big dividends on a budget should pay Hastings Group (LSE: HSTG) close attention too. The car insurance giant may be facing the double whammy of rising claims costs and intense competition, though I’m confident that the outlook remains quite rosy for the FTSE 250 firm.

Motor premiums are on the gallop again, after all. Data from Consumer Intelligence shows that average costs have gained 2.2% over the past 12 months, continuing the steady recent upswing in insurer prices.

But rising premiums aren’t the only reason to be encouraged by Hastings’ investment case. I also like the rate at which it is pulling customers away from its competitors. Its share of the private motor market rose 30 basis points year-on-year to stand at 7.8% in September. And as a consequence, the number of live policies on its books jumped 5% to number 2.84m.

No wonder City brokers expect profits at Hastings to rip higher. Current estimates suggest a 22% bottom-line rise in 2020, resulting in a dirt-cheap P/E ratio of 11.4 times. And this leads to predictions of more dividend growth and a 6.9% yield as well.

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

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.