Formerly known as Countryside Properties, the UK housebuilder and urban regeneration firm has endured a tough year. In January, CEO Iain McPherson stepped down from his role after the company’s operating profits fell from £36.6m to £16.5m in Q1.

Why did shares fall today?

the shares fell on Thursday after Countryside Partnerships said annual profit would fall. The housebuilder also published a damning review of its own operations.

The company admitted that it expanded too quickly and botched the acquisition of Westleigh in 2018. The review highlighted a number of “execution-related” failures and stated that operations continued to be impacted. Project delays, poor workmanship, as well as rising costs were all cited as issues that affected the group’s operations.

Countryside said it would respond to the findings of the review. Costs would be cut and an unspecified number of jobs would be shed.

The Brentwood-based firm stated that annual adjusted operating profit was expected to fall from £167m to £150m. The current year’s estimate excludes £10.1m of one-off costs as well as £10m of operating losses at the manufacturing division. £15m of expected cost savings were also not included.

Acting CEO John Martin said that the firm would quickly act upon the recommendations of the review. “There remains significant market demand for our homes and we did not identify any competitive issues during our review,” Martin added, striking a more positive tone.

The company’s shares had plunged 17% to a five-year low of 231p by 8:37am.

Should I buy?

Nothing quite puts me off a housebuilder like reports of poor workmanship and mismanagement. This is particularly the case following the cladding fiasco that has trapped thousands in dangerous and unsellable homes. Now homebuilders are having to pay for their role in the crisis.

Overall, the trend doesn’t exactly look great for Countryside, especially considering the performance of other housebuilders in the booming property market. The firm said that adjusted revenue fell 13% to £658.6m in the six months to March 31, down from £755m a year before. This is reflected in operating profit for the period, which fell 42% to £45.6m from £78.6 million a year before.

Countryside said the unfavourable results were exacerbated by comparatively strong performance in the first half of the 2021 financial year. It noted that completions at the end of 2020 were delayed until the first half of financial 2021 due to lockdowns.

However, the six months to March 31 were still down on the same period in 2020/2021.

One positive is that Countryside appears to be less impacted by the cladding crisis than other housebuilders. Signing the government’s fire-safety pledge will cost it around £24m. Another positive is its clear focus on taking action.

I’m quite bullish on housebuilders, but not on this one. I’m concerned about the long-term impacts of its botched growth strategy. And its inability to capitalise on the super-strong property market over the last six months is also an issue. I won’t be buying.

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We had an update from LondonMetric on Thursday, describing some acquisitions and disposals. The firm has sold four retail properties, including two M&S Food stores, for a total of £22.2m. Against that, it’s spent £10.8m buying three convenience service stations. With the bricks-and-mortar retail industry under pressure, I think that could turn out to be a canny move. The latest moves come on top of several acquisitions and disposals in recent months, and I think LondonMetric is making the most of opportunities thrown up by the stock market crash.

The disposals have realised a £4.1m profit on cost, for an ungeared internal rate of return of 11% per year. That sounds like good investment management to me. The newly acquired service stations should provide a net initial yield of 4.7%, rising to 5.2% over five years. They’re let to BP for another 16 years, and LondonMetric says their “vacant possession value is materially above the purchase price“.

LondonMetric has been paying nicely progressive dividends for years, and forecasts suggest more of the same. We’re looking at forward yields of close to 4%. I like investment trusts, I like REITS, and if you fancy a property investment, I rate LondonMetric as an attractive buy.

Stock market crash loser

Shares in FTSE 250 housebuilder Countryside Properties (LSE: CSP) have been doing less well in 2020. The shares were storming ahead in the first couple of months of the year. But the stock market crash sent them spiralling downwards. As I write, the price is down 27% year-to-date. And it’s fallen 4.5% on the day, after the release of a full-year trading update.

Total completions for the year are down, to 4,053 homes from 5,733 homes in 2019. And the average selling price has dropped a little, from £367,000 to £364,000. But looking forward, the company is enjoying a boost to its order book, up 17% to £1.4bn.

The balance sheet was a problem earlier in the stock market crash, which Countryside addressed with a new share issue in July. It placed 74.6m new shares, raising £250m. The result is net cash at 30 September of £98.2m, from £73.4m a year previously. The firm got the share placing done without problems, suggesting to me that institutional investors are bullish over the long-term prospects for the housebuilding industry. I am too.

The dividend has been suspended in this tough year, in which analysts expect earnings to fall heavily. But a partial rebound on the cards for 2021 would put Countryside Properties shares on a price-to-earnings multiple of around 16.5. I expect that to drop significantly in 2022. I rate Countryside Properties a buy, along with the sector as a whole.

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Home creation in the UK has clicked through the gears of late. Official data shows that there 241,130 new homes were made in 2018–19. This was the highest number since records began three decades ago.

Don’t be fooled into thinking that we could be at the beginning of a building renaissance, however. A large chunk (more than 10%) of the total were homes created through a change of use, like the conversion of office buildings. This finite supply is clearly not the answer to solving Britain’s housing crisis, one that continues to propel sales of newbuilds and keeps property prices largely rising. It will also likely not help government plans to create 300,000 new homesteads a year by 2025.

Sales boom!

Which brings me neatly to Countryside Properties. This is a share which has long benefitted from the UK’s yawning supply and demand gap, as was highlighted in last week’s trading update.

Apparently the FTSE 250 firm’s net reservation rate had sprung to 0.81 between October and December. This represented a chunky 29% year-on-year improvement and helped the private forward order book to leap 46% to £344m.

There was “robust” demand for its affordable and private rented sector (or PRS) homes too, it said. Consequently Countryside’s total forward order book boomed 65% for the first fiscal quarter. Standing at £1.57bn as of December this set a new all-time high for the quarter.

The business is now operating at 142 sites versus 129 a year ago, it said. And it has six more selling outlets up and running too, at 60. This is no surprise given that Countryside continues to witness “strong customer demand across [the Partnerships and Housebuilding] divisions for all tenures of homes.”

Growth goliath

The strong update enabled City analysts to keep their bullish earnings forecasts intact. They expect Countryside’s to continue with an 8% rise in the year ending September 2020. A further 9% annual increase is estimated for the following financial period.

It doesn’t matter that Brexit uncertainty looks set to persist through 2020 and possibly beyond. That nationwide supply shortage means that demand for Countryside’s product is likely to remain substantial. An environment of low interest rates and government support via Help to Buy has driven is supercharging sales, too.

Government continues to talk tough when it comes to the housing crisis. But it still has a jungle of regulations to unravel before it can get Britain building its way out of the problem. And to date it has shown little appetite to solve the problem. This is why I’m not alone in expecting profits for Countryside and its peers to keep bubbling higher long into the future. Its share price might have rocketed 38% in three months but it still looks cheap, in my opinion. I’d happily buy the business and its forward price-to-earnings ratio of 11.2 times for my retirement fund.

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Tritax owns and operates so-called ‘big box’ logistics assets typically greater than 500,000 sq ft, which are large warehouses to you and me.

Rising demand

The demand for this kind of asset has boomed during the past decade, thanks to the growth of the e-commerce market. Retailers all over the world are rushing to develop the infrastructure required to fulfil customer orders at the click of a button and offer next-day delivery as standard.

In this market, companies like Tritax can’t develop new space fast enough. Over the past six years, the group’s balance sheet has grown five-fold, as it has bought and constructed assets to add to its portfolio.

The most recent additions include a pre-let asset in Corby and speculative developments in Bicester and Doncaster, which added 1.1m sq ft to Tritax’s 30m sq ft investment portfolio during the first half of its financial year.

Other developments also in the pipeline include a 661,201 sq ft big box, pre-let to the Co-Operative Group in Biggleswade. These new and planned developments should support the company’s dividend growth for the next few years.

Dividend growth

Since 2014, Tritax’s dividend has increased at a compound annual rate of 8%, and City analysts are expecting the company to distribute 6.9p per share this year, followed by 7.1p in 2020, giving a dividend yield of 4.8% on the current share price.

On top of this, the stock is currently dealing at a price-to-book ratio of 0.98, implying you can buy shares in this REIT today for less than the current value of its assets.

Undervalued

Another FTSE 250 dividend stock I’d consider adding to my portfolio in 2020 is homebuilder Countryside Properties (LSE: CSP). Investors have been selling shares in this company recently due to concerns about its growth potential. However, while the share price has been sliding, the business’s fundamentals have only improved.

The company’s full-year 2019 results, which were published at the end of September, showed a 21% increase in revenues and a 14% jump in operating profit. Basic earnings per share also rose 14%. Off the back of these numbers, management declared a 51% increase in the company’s full-year dividend to 16.3p.

City analysts are expecting this growth trend to continue for the next two years. They’re projecting earnings growth 15% for fiscal 2020, and 9% for 2021.

Based on these growth targets, shares in Countryside are currently dealing at a 2021 P/E of 8.9, which is too cheap for this growing business, in my opinion. The rest of the UK homebuilding sector is dealing at a forward P/E around 10.

Shares in Countryside also support a dividend yield of 4.1%. The payout is covered 2.5 times by earnings per share, and it’s also backed up by £78m of net cash on the balance sheet.

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During the six months to September, its EPRA unaudited net asset value — a figure which also included income at that time — soared to 170.12p per share from 153.02p a year earlier. Not only were its student digs fully occupied for the current academic year, but rents were also up 4.4% on a like-for-like basis.

It’s clearly not a shock to see GCP’s share price continuing to surge. It’s up 22% since the start of 2019 and currently trading around all-time highs of 180p per share, leaving it trading on a forward P/E ratio of 29.3 times.

Reassuringly expensive

Expensive on paper, sure, but this particular FTSE 250 stock is worthy of such a toppy rating given the rate at which earnings are rising (City analysts are forecasting another 19% bottom-line rise in the current fiscal year to March 2020).

Indeed, so strong is trading at GCP, not to mention the state of its balance sheet, that the business announced it was shelling out its first interim dividend (of 1.57p per share) for the three months to September. For the full financial year, those same City brokers are forecasting a 6.3p total reward, one which yields an inflation- and market-beating 3.5%.

GCP goes to show that it’s possible to make big profits from UK property without the bother that comes with modern buy-to-let investing.

Country corker

Another property share shelling out market-beating dividends today is Countryside Properties (LSE: CSP). And like GCP, this is a company whose stock value is also ballooning right now (record highs of 385p per share mean it’s up a staggering 27% since the turn of the year).

In spite of these mighty gains, though, it could still be argued that this particular FTSE 250 share remains undervalued by the market. At current prices, investors can tuck into a P/E ratio of 8.8 times for the present financial year (to September 2020), well inside bargain-basement territory of 10 times and below.

What’s more, Countryside’s corresponding dividend yield of 4.6% — a reading that thrashes the broader UK forward yield of 3.3% for the UK’s mid-caps — provides plenty of value as well, thanks to an anticipated 17.6p per share payout.

The shadow of Brexit is still restricting share buyer appetite, sure, but with property demand from first-time buyers still outpacing supply, profits continue to boom. Adjusted earnings per share rose 13% in the fiscal year just passed, and thanks to a “record” forward order book, City analysts are predicting another 9% increase in financial 2020. With government housing policy looking as confused as ever, buy Countryside today, I say, in the expectation of Britain’s housing shortage delivering strong profits growth into the next decade and probably well beyond.

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Government has talked the talk in terms of addressing the shortage but is yet to walk the walk. And fresh construction data from the Ministry of Housing, Communities and Local Government shows just how badly policymakers are failing, revealing that there were 241,130 new homes — whether through new constructions or property conversions — supplied to the market in 2018/19.

This may have been up 9% year-on-year and the highest level for almost 30 years, but it is a figure which still lags Whitehall targets by some distance. Politicians have acknowledged that Britain needs to build around 300,000 new homes by the middle of the next decade, yet only 213,660 of these brand-new abodes were built in the last year.

Big dividends at low cost

So far government has shown little appetite to hack back the colossal amounts of red tape to supercharge new-build production rates, and with Brexit threatening to keep dominating policy time well into 2020 (and probably beyond) I for one have little hope of significant action on this front any time soon. And one great way to play this inertia is by buying shares in Countryside Properties (LSE: CSP).

It’s no surprise to see the FTSE 250 firm’s share price swell 25% in the past three months alone to current levels around 360p per share, an ascent supported by Britain dodging the no-deal Brexit bullet at the end of October. Yet despite these gains, Countryside still looks relatively undervalued, the firm sporting a forward P/E ratio of 8.6 times — inside the bargain-benchmark region of 10 times and below — as well as a monster 4.9% dividend yield.

Picking up momentum

And the release of full-year results next week (November 21 to be exact) could provide the homebuilder with the scope for fresh share price rises. The business certainly impressed last time it updated in July with news that its weekly net reservation rate (per outlet) was up 12% at 1 between April and June, while its forward order book was up by an even-better 17% at £1.14bn. What’s more, a stream of positive updates from across the housebuilding sector since then convinces me that another solid update is in the offing.

City analysts expect earnings growth at Countryside to improve despite the impact of Brexit on the broader housing market, an 8% rise for the fiscal year to September 2019 being expected to improve to 10% for the current period, helped by the firm’s aim to supercharge build rates. I consider Countryside one of those rock-solid shares that could help you make a fortune in the years ahead.

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I’m sure you can imagine my pleasure on Friday with the share price bounce across the entire homes sector. It’s not a surprise following a last-gasp meeting between UK and Irish prime ministers Boris Johnson and Leo Varadkar on the previous day, a summit in which they said that “a pathway to a possible Brexit deal” had been identified.

Countryside Properties (LSE: CSP) is a riser on the back of the news and is up more than 6% as I type. But could the market be overreacting a little here? Possibly. There have been plenty of false starts in the search for a Brexit breakthrough and there remain plenty of pitfalls for any deal between now and the signing of a treaty between UK and European Union lawmakers at the close of the month.

Indeed, Varadkar himself has tried to temper expectations by noting that there is “many a slip between cup and lip, and lots of things that are not in my control,” comments which have seemingly been thrown aside by excited market makers today. It’s quite possible that Countryside and its peers could find themselves trending lower again before too long.

Almost 5% dividend yields

This doesn’t lessen Countryside’s appeal as a brilliant share to buy today, however. Even in the wake of today’s monster price gains, the construction star still changes on a forward P/E ratio of 7.6 times, some way below the bargain-basement watermark of 10 times and below.

Such a reading doesn’t correspond, certainly not in my opinion, with a share that remains in great shape to keep delivering brilliant profits growth (another double-digit annual earnings rise, this time by 10%, is predicted by City analysts for the fiscal year to September 2020).

Countryside, though, isn’t just an appealing pick on the basis of current profits forecasts. With expectations of extra bottom-line growth and strong cash flows come predictions of more dividend increases too, meaning that the FTSE 250 boasts a giant 4.9% yield for fiscal 2019. This beats the UK blue-chip average of 4.5% by a decent margin.

It’s a keeper

Why am I convinced that Countryside is a great stock for the next 10 years at least, though? Well I am buoyed by the fact that, despite Brexit creating the most difficult conditions for the UK housing market for decades, earnings across the sector continue to march steadily skywards.

It’s a reflection of muddled government housebuilding policy, which means that buyer demand, while weaker than that of yesteryear, continues to outstrip supply. Most recent official statistics have shown, in fact, that construction rates in England continue to go backwards, with new-build starts of 37,220 in the three months to June, down a whopping 8% year-on-year.

It’s no wonder that Countryside reported a 17% improvement in its forward order book in the same quarter when it last updated the market in July. And I’m expecting another set of rosy numbers when full-year financials are released on November 21.

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I reckon, though, that the business is an undervalued gem. Carrying a forward P/E ratio inside the bargain bin basement of 10 times or below (at 7.5 times), and boasting a brilliant corresponding dividend yield of 5%, on paper it certainly provides plenty of bang for your buck.

And I reckon this low, low rating could prompt a flurry of buying in the weeks ahead. Indeed, there are many robust trading statements that I’m expecting from Britain’s homebuilders in August alone — Taylor Wimpey, Persimmon and Bellway are a few slated to update the market — and I believe this could cause a slew of positive energy to flow across the entire sector.

Escape to the country

Countryside has itself put in a rosy update of its own in recent days, one which has helped its share price climb off those aforementioned troughs. In it, the Essex business celebrated the “strong customer demand” which it keeps witnessing across all of its categories of homes and in spite of the prolonged uncertainty being brought about by Brexit.

So while completion numbers and average selling prices were broadly stable year-on-year in the three months to June, Countryside saw the net reservation rate rise 12% to 1 and its total order book swell 17% to £1.14bn. It’s no wonder that the business plans to turbocharge build rates from the current quarter.

What’s particularly rare about this housebuilder is the fact that, unlike most of its competitors, City analysts for the most part expect annual earnings to keep soaring in spite of the slowdown in the broader housing market.

Bottom-line rises of 10% and 11% are estimated for the years to September 2019 and 2020 respectively, figures which make Countryside’s dirt-cheap valuations all the more bewildering in my opinion. If you’re looking for a terrific dip buy paying big dividends, I reckon this is a stock worth a place in your portfolio.

Set to soar?

I would extend my bullishness to Meggitt (LSE: MGGT), not that this FTSE 250 share has experienced any share price woe of late. In fact, a recent spurt has taken it to record peaks just shy of 600p.

It’s worth considering the possibility of additional gains once the aerospace giant unveils interim results on August 6. Meggitt certainly impressed last time out in late April when it cheered “strong” trading in the first quarter. That was thanks to robust end markets and its programme of increasing content on new aircraft classes, with revenues rising across both defence and civil aviation segments.

Unsurprisingly, City analysts expect earnings growth to accelerate over the medium term, an anticipated 5% rise for 2019 giving way to a predicted 10% increase next year. And combined with its exceptional cash flows, Meggitt’s expected to keep its progressive dividend policy in tow, resulting in an inflation-mashing forward yield of 3%. I reckon this is another top FTSE 250 buy for next month.

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An 10% share price decline in the past month now leaves the homebuilder dealing on a forward P/E ratio of 7.5 times. This makes it too cheap to pass up in my opinion. In the infamous words of Theresa May: “Nothing has changed,” a statement that can be easily extended to Countryside and its peers.

Home price growth remains subdued, of course, reflecting the slowdown in the broader housing market. This means that the ripping earnings expansion seen in recent years at the homes creators is well and truly over.

That said, the capacity for the builders to keep generating chunky profits growth remains strong because of the mortgage rate wars underpinning buyer demand, and the shortage of available properties for them to snap up which is driving newbuild sales.

It keeps on trucking

The more favourable market conditions were underlined by Countryside last week during bubbly half-year results. The FTSE 250 firm said adjusted revenues rose 20% in the six months to March, a performance which helped adjusted operating profits boom 11% to £89.4m.

The construction colossus in particular paid tribute to “a strong second quarter with a net private reservation rate at the top of our target range,” a performance which helped the net reservation rate remain stable from the same period last year at 0.86.

It’s no wonder then that Countryside took the decision to boost build rates and to acquire Westleigh Homes to capitalise on the fertile trading environment — its forward order book stood 49% higher from March 2018, at £1.04bn.

Now Countryside isn’t having it all its own way and, reflecting the broader pressure on property prices in some parts of the UK, the average selling price of its homes fell £25,000 to £377,000 on the first half. 

However, City brokers don’t reckon this will preclude the business from recording some substantial profits increases in the medium term at least, with current consensus forecasts suggestive of 12% earnings rises in both this year and next.

Surging dividend yields

Countryside isn’t a share that’s all about growth, either. As I’ve said, this particular company is a great buy for income chasers as well because of the rate at which it’s hiked dividends over the past few years. And it’s still at it, the interim dividend surging more than 40% year-on-year to 6p per share.

For the full year to September 2019, City analysts are predicting a dividend of 12.7p per share, up from 10.8p last year and yielding a fatty 4%. Things get even better for fiscal 2020 too, as the anticipated 13.8p payment yields 4.5%.

If you’re looking for the magical blend of growth and income, I reckon Countryside is hard to fault. And what’s more, it’s low, low valuation seals its position as a white hot buy, certainly in my opinion.

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Construction time

The FTSE 250 home builder and urban regeneration partner’s update for the six months to 31 March shows it remains on track to meet full-year expectations. Completions should total 2,362 homes, a strong figure even though the average selling price dropped 4% to £377,000. This was largely due to an increased contribution from its regional businesses, where prices are lower than in London and the South East.

Countryside also boasts a strong total forward order book, up a whacking 49% to £1.037bn. The net reservation rate is at the top end of its target range at 0.86, down only slightly from 0.87 last year. Net debt has risen to £42.1m, against net cash of £13.7m last year, but that was better than expectations and doesn’t appear to bother investors.

Spring time

Countryside has been successful in winning new business and after a slower start to the year, Q2 customer demand has held up well. Group CEO Ian Sutcliffe says that despite the wider political and macroeconomic uncertainty, demand for mixed-tenure homes remains strong and the group has enjoyed “a robust spring selling season” and enjoys “excellent visibility of future work”. It remains confident of delivering its medium-term growth plans.

The £1.52bn company trades around 12% lower than a year ago, as wider uncertainties hit housebuilding stocks generally, and is now at a tempting valuation of just 8.1 times forecast earnings, with a PEG of just 0.6.

Decision time

The forecast dividend yield is 3.8%, with very healthy cover of 3.3%. Recent years’ earnings per share (EPS) growth has been pretty astounding, at 196%, 70% and 30%, although the next couple of years look steadier at 12% each. Rupert Hargreaves presciently picked it out as one of his three top growth stocks for April.

My question is whether you could do better with a sector peer. You can certainly get higher income elsewhere. For example, Persimmon (LSE: PSN) currently has a forecast yield of 10%. However, as fellow Fool Kevin Godbold points out, the company’s yield is a special case, and may be more susceptible to future profit swings than other company payouts.

Capital move

Persimmon has relatively little London exposure, which is working out well as the capital’s market slows. This FTSE 100 stock is a bigger beast than Countryside with a market cap of £7.5bn but is also available at a bargain valuation, in this case just 7.6 times earnings.

However, its growth trajectory appears to be slowing. After five years of healthy double-digit EPS increases, the company’s earnings are expected to be flat in 2019, and rise just 1% the year after. Also, it still hasn’t shaken off the controversy over former chief executive Jeff Fairburn’s mind-boggling bonus payments.

Interestingly, broker Jefferies recently examined the housebuilding sector and named Countryside its number one buy, while labelling Persimmon a hold. The property market is slipping but demand remains steady given support from Help to Buy and the average residential mortgage rate being a record low 2.6%, according to Ludlow Thompson.

Today’s high yields and low valuations make the sector hard to resist, for those who accept the risks.

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