With Britain’s housing crisis showing no signs of easing, I am convinced Taylor Wimpey (LSE: TW) should keep delivering exceptional returns long into the future.
While mortgage rates may have crept modestly higher recently, overall lending conditions still remain favourable for first-time buyers. Moreover, as economic uncertainty also caps the number of existing properties entering the market, home prices are remaining well supported.
As a consequence the City expects earnings at Taylor Wimpey to maintain their solid upward trajectory, and rises of 4% and 5% expected in 2017 and 2018 respectively, resulting in ultra-cheap P/E ratios of 9.7 times and 9.2 times.
And Taylor Wimpey also offers excellent rewards for dividend chasers, the firm throwing out blockbuster yields of 7.8% for this year and 8.4% for the next period.
Financial favourite
I reckon RSA Insurance (LSE: RSA) is also a stellar pick for those seeking sterling growth and income prospects.
The insurer’s long-running restructuring plan took another significant step this month with the sale of £834m worth of UK legacy insurance liabilities related to Enstar Group, boosting the firm’s balance sheet and giving its earnings outlook a shot in the arm.
With the heavy lifting now almost out of the way, the ground is now laid for RSA Insurance to double-down on its core territories of the British Isles, Scandinavia and Canada. And strength across these regions helped power operating profit 25% higher during 2016, to £655m, the firm announced this week.
And the City expects earnings to keep rattling higher, pencilling-in growth of 51% this year and 18% in 2018, resulting in P/E ratios of just 13.8 times and 11.8 times.
Furthermore, RSA Insurance’s splendid profits prospects are anticipated to light a fire under dividends — indeed, a yield of 3.5% for the current period is expected to leap to 4.7% next year.
Manufacturing marvel
I also believe diversified engineer GKN (LSE: GKN) is on course to deliver great shareholder gains as auto-building rates continue to race higher.
Researcher IHS Markit forecast just this week that, despite the impact of political uncertainty in the US and Europe in 2017, surging South Asian demand should still propel global car sales 1.5% higher from last year’s levels, to 93.5m units.
GKN supplies parts for 90% of the world’s auto manufacturers, but the car industry is not the only reason to invest in the business. The Redditch firm is also a major supplier to the global aerospace industry, and has executed clever acquisitions like that of Fokker in recent times to boost its supply capabilities to the world’s biggest planebuilders.
The number crunchers have chalked-in earnings expansion of 13% and 5% in 2017 and 2018 alone, figures that produce attractive earnings multiples of just 10.7 times and 10.2 times.
While dividend yields may be less appetising — yields clock in at a handy-if-unspectacular 2.7% and 2.8% for 2017 and 2018 — I believe GKN’s leading position in growing markets should keep sending payouts comfortably higher in the years to come.