By Malcolm Stacey | Wednesday 13 September 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Hello, Share Tanglers. The idea of living on a Barratt housing estate used to fill me with dread, but a lot of folk seem to like its houses nowadays, so I humbly suggest you look at the shares.
Full year results for Barratt Developments (BDEV) contained an announcement that the final dividend was going up by nearly 40% to 17.1p per share. Plus you get another 17.3p by way of a special share-out. Now does this sound to you like a struggling company?
House prices are slowing down, but not as quickly as expected after the Brexit vote. As with all home builders, the low interest rate encourages folk to buy homes. If that rate was going to increase any time soon, that would be no encouragement at all. But it seems that the Bank of England has no such plans.
Stoked by government help-to-buy schemes, demand for Barratt homes is strong. The company finished 17,400 gaffs in 2016/17, its biggest number for nearly a decade. The divi is tasty and the company says it also proposes another special divi in 2018. And the P/E ratio I have is less than 10, which is half my general ‘get a bit worried’ point.
Another ‘buy’ consideration is that the company has grown its operating profit without a correction since 2011 at least. In these up and down days for the stock market, that is an important plus point. One of the biggest drivers of a share price, a bigger demand than supply, also applies, as few inroads are being made into Britain’s huge shortage of homes, especially affordable ones.
Not all builders are facing such a rosy future, but Barratt has been around a long time and knows how to keep the cash rolling in. Which makes it a reasonable long-term punt.
And now its across to the Punter’s Return.
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