Britain’s listed housebuilders have enjoyed a bumper bounce this week on the back of a slew of good news. Following Chancellor George Osborne’s decision in yesterday’s Autumn Statement to axe stamp duty for 98% of homebuyers, the Bank of England — admittedly to no-one’s surprise — elected to keep interest rates at record lows of 0.5% today.
And news that Barratt Developments (LSE: BDEV) and Taylor Wimpey (LSE: TW) have both been promoted to the FTSE 100 during this winter’s reshuffle has proved the icing on the cake.
With this in mind I am looking at what the London Stock Exchange’s blue-chip new boys are set to serve up in the coming year.
Barratt Developments
Despite fears of a slowdown in the housing market, Barratt noted in November’s interims that market conditions remain “robust” across all parts of the country. Indeed, the business saw forward sales leap 12% in the 19 weeks to November 9, and against this backcloth the company is looking to raise the number of new sites to 180 in 2015 from 132 this year.
The firm has delivered stunning earnings growth in each of the past four years, and City analysts expect Barratt to keep the bottom line surging higher in 2015. Indeed, current projections indicate a sterling 38% earnings increase in the 12 months to June 2015, to 43p per share.
These numbers make the housebuilder terrific value, in my opinion, creating a P/E multiple of just 10.7 times — any figure around 10 times or below is widely regarded as tremendous bang for your buck. And Barratt’s decent price is underlined by a price to earnings to growth (PEG) readout of just 0.3, well below the value benchmark of 1.
On top of this, the company can also be considered a decent pick for those seeking delicious dividend prospects, with a series of special payments expected to push the full-year dividend to 21.1p per share in 2015, creating a yield of 4.6%. By comparison the FTSE 100 sports a forward average of just 3.3%.
Taylor Wimpey
Not surprisingly the housing crunch is also creating a bubbly order book at Taylor Wimpey, and the business announced that it had already sold 25% of its quota for 2015 as of November’s interims. On top of this, good pricing and excellent cost discipline is also boosting margins at the firm, a phenomenon which prompted the business to raise its guidance to 400 basis points in November’s update.
Following an expected 60% earnings improvement in 2014, to 10.7p per share, Taylor Wimpey is anticipated to print an extra 34% in 2015 to 14.3p. As a result the company’s P/E multiple moves from an appealing 12.4 times potential earnings for 2014 to just 9.3 times for next year. As well, the construction play’s PEG multiple rings in at just 0.2 and 0.3 for 2014 and 2015 correspondingly.
And like Barratt, Taylor Wimpey is also predicted to shell out increasingly-appetising dividends this year and next. Indeed, a payment of 2.4p per share this year is expected to surge to 8.6p in 2015 as the company’s exceptional cash-generative qualities keep the special dividends rolling.
As a result Taylor Wimpey’s yield leaps from 1.8% in 2014 to an eye-popping 6.4% for 2015.