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Tom's Wrong on House Builders - and Barratt's Latest Star Numbers Should Continue to Shine

By Malcolm Stacey | Monday 10 September 2018

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 Turners. Time was when comedians told jokes about Barratt houses. No longer. There is perky customer satisfaction. And though I have my detractors on this stupendous website, I still think Barratt Developments (BDEV) continues to go places fast. And so I fancy will the share price.

The firm’s year-long results show a boost in revenues by nearly 5% to almost £5 billion. And to those who say, quite rightly, that revenue is vanity, we should also note that profit went up even more - by over 9% to £835 million. Does that sound to you like a firm to be worried about?

Other supporters of Barratt shares thumb their noses at two problems house builders may face in the near future. These are well-known, but let me repeat them anyway. Rising interest rates making mortgages more expensive and falling house prices.

Well, interest rates won’t rise very fast and start from a really low base, anyway. And those dipping house prices may prove to be something of a myth. At least, if the latest optimistic outlook from the Halifax can be believed. It says that even London house prices may have stopped falling.

Barratt does low-cost housing. And the Government is falling over itself to financially support affordable homes. It has to, as demand continues to outstrip supply while wages fail to keep up. Schemes which should help Barratt enormously include Help to Buy, the Lifetime ISA and stamp duty concessions.

But what will interest you more, chums, is the delicious dividend policy. I estimate the prospective yield at 8%. Now you might prefer to go with Tom and my other critics on house builders. There’s no denying that it can be a volatile market. But personally, I would not sell any of my stocks in the sector, though I don't currently hold Barratt shares.

And now please let’s build on our friendship in the Punter’s Return.

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