In a recent piece I explained why buying shares in food producers is a brilliant defensive play in uncertain times like these. In days gone by the same could have been said for FTSE 100 food retailers like Tesco, Morrisons, and Sainsbury’s.
This is no longer the case, though. As well as battling against weak consumer spending levels of late, the ongoing fragmentation of the British grocery space has hammered their till takings too. And if fresh data from PwC is to be believed this trend is set to continue at an alarming pace. Almost 30% of those taking part in a recent survey said that they plan to shop around even more.
Reflecting these woes, underlying sales at Sainsbury’s dropped 0.7% in the 15 weeks to 4 January. Corresponding revenues at Tesco dropped 0.2% in the 19 weeks to 6 January. And trading has been even worse at Morrisons, the firm reporting a like-for-like sales drop of 1.7% in the 22 weeks to 5 January.
And it’s difficult to see these established operators turning things around any time soon as the likes of Aldi and Lidl expand rapidly.
A better Footsie buy!
I’d be much happier splashing the cash on Taylor Wimpey (LSE: TW) today. It’s just one of the housebuilders to release robust trading numbers this month. And what’s more, impressive updates concerning the broader housing market continue flowing in thick and fast.
A house price survey from Nationwide is the latest gauge to underline the robustness of the market. Property prices have on average risen by 1.9% this month, the building society says. This was the fastest rate of growth for 15 months.
Better near-term Brexit clarity following December’s general election has helped house prices, sure. Though irrespective of what political developments we can expect in 2020 (and beyond), the UK’s colossal homes shortage means that property values should remain pretty robust. This is something we have already seen in the last few years.
More monster dividends?
City analysts are in broad agreement, too. This is why they expect Taylor Wimpey to record earnings rises in 2020 and 2021 (of 1% and 4%). Predictions of further stability mean that the number crunchers expect the business, like many of its peers, to remain a mighty dividend payer.
Forecasters believe in Taylor Wimpey’s pledge to lift a proposed total dividend of 18.34p per share for 2019 to 18.6p this year. This means a jumbo 8.7% dividend yield. And they expect the Footsie firm to keep doling the special payments out, too. Thus an 8.8% yield is in place for 2021, created by an estimated 18.7p reward.
Taylor Wimpey is a share I loaded up a few years ago in an ISA. And its hardiness in tough conditions for the broader housing market since then has reinforced my confidence. With those jumbo yields and low rating – it currently deals on a forward price-to-earnings ratio of just 10.7 times – I reckon this is an exceptional buy for income investors right now.