Many investors will no doubt be in a state of slight bewilderment as to whether to pile into the housing sector following a stream of contradictory industry datasets since June’s Brexit vote.
But those suggesting that the housing industry remains in rude health would no doubt have felt vindicated by latest Halifax industry data this week, which showed home values up 1.4% last month. While down from the 5.2% advance in the three months to October, it has gone some way to easing concerns that home sales are about to fall off a cliff.
And while Halifax economist Martin Ellis noted that “house price growth may ease further in the coming months,” he added that “very low mortgage rates and a shortage of properties available for sale should help support price levels.”
Britain’s chronic housing shortage, and subsequent support for stratospheric price rises, has translated into bumper earnings growth for the likes of Bovis Homes (LSE: BVS) for many years. However, a cyclical market slowdown and rising construction costs are anticipated to put paid to this trend in the near future for many of the sector’s major players.
Indeed, Bovis Homes is expected to follow a 15% bottom-line rise in 2016 with a 5% dip next year, or so say City analysts. These troubles aren’t expected to shake the firm’s progressive dividend policy, however, and last year’s reward of 40p per share is expected to stomp to 44.8p in 2016 and to 45.9p in 2017.
These figures yield a terrific 5.6% and 5.7% respectively. And dividend cover of 2.4 times and 2.3 times for these years should soothe investor concerns over Bovis Homes’ bumper projections.
Whilst it’s too early to accurately predict the full impact of the EU referendum on the UK economy, I reckon a combination of low interest rates, favourable lending policies, and a long-running shortage of available housing should keep dividends at Bovis Homes shooting higher long into the future.
Shopping star
Fashion retailer N Brown (LSE: BWNG) is another FTSE 250 (INDEXFTSE: MCX) star with stunning investment potential, in my opinion.
Of course a backdrop of rising inflation is likely to translate into huge pressures for British retail next year and beyond. But I believe N Brown’s niche brands like Jacamo and Simply Be — fascias which cater predominantly to ‘plus size’ customers — should help it to avoid the woes endured by the likes of Next and Mark & Spencer.
And I also have great faith in N Brown’s growing footprint in the rapidly-rising online segment to keep revenues rising too. The retailer saw sales here rise 7.5% during March-August, and cyberspace sales are likely to keep heading higher as its digital transformation scheme rolls on.
The number crunchers expect N Brown to keep the dividend locked around 14.23p per share in the periods to both February 2017 and 2018 as earnings more-or-less stagnate. But these forecasts still create a stonking 7.5% yield.
With N Brown also carrying chunky dividend cover of 1.6 times through to the close of next year, I reckon the clothes colossus has what it takes to keep doling out massive dividends.