I’m looking at three today, all of which I think look good value for income investors like me. And we’ll have interim updates from all of them during the month. Will good news help turn around their share price weakness?

Construction

First is Morgan Sindall (LSE: MGNS), with first half results due on 4 August. Morgan Sindall is one of the UK’s biggest construction groups, active in everything from affordable housing to infrastructure projects.

The shares put in a bit of a recovery in 2021, but they’ve gone off the boil a bit so far this year. And I think that leaves the stock on an attractive forward valuation. We’re looking at a forecast price-to-earnings (P/E) ratio of only a bit over nine, and dropping.

The forecast dividend yield is around 5% and rising. That’s not one of the biggest yields around, but it has one key characteristic that I like. The 2021 dividend was covered almost two and a half times by earnings.

That boosts my confidence that dividends, heavily cut for the pandemic year of 2019, could be in for a sustainable progressive run now.

Investment

The whole asset and investment management business has tanked of late, suffering cash outflow as investors shift their money elsewhere. To my mind, that’s left Abrdn (LSE: ABDN) looking cheap, after a share price fall of close to 50% over the past 12 months.

The drop has pushed the forecast Abrdn dividend yield up to a whopping 9%. There must be fears that such a high level might not be sustainable, especially with our current economic outlook.

But on 6 July, the company announced a new £300m share buyback to return surplus capital to shareholders. The first phase, of up to £150m, has already commenced. Yes, there are risks. But I see this as a vote of confidence in the company’s ability to deliver long-term income.

First-half results are due on 8 August.

Insurance

Moving to 22 August, we should know how the first half went for Phoenix Group Holdings (LSE: PHNX).

As an insurer, Phoenix is a little difference to most. It acquires legacy life insurance and pension assets that are closed to new business, and makes its money from managing them. It currently owns brands that include Standard Life and SunLife.

Phoenix has been generating strong cash from this business, and delivering progressive dividends. And after a weak year for the share price, forecasts now suggest a yield in excess of 8% this year, rising further after that.

Risks

All of these come with the risk that they’re in sectors likely to suffer more during an economic downturn than most. And I think share price weakness could continue in the second half of 2022.

And if August’s updates show any sign of dividend weakness, we could see dips. But, right now, I like the look of these as long-term income investments.

Here’s how I’d aim for a total of £30,000 a year in later life.

Maximising the State Pension

I’ll assume that I’ll get the maximum State Pension amount (I’ll need 10 years to be entitled to a pension and 35 qualifying years to bag the full amount).

I anticipate I’ll work for a sufficient period to meet the starting threshold. However, if my stock market gains are better than expected, early retirement is a possibility.

In that case, I’d pay voluntary contributions to maximise my State Pension payments.

So, as simply as that, I’ve secured my first £9,627.80 in annual passive income for retirement, barring drastic changes in government policy.

Investing in dividend stocks

I now need the remaining £20,400 to come from a diversified portfolio of dividend stocks. Let’s explore two on my watchlist.

M&G (LSE: MNG) is a global investment manager with exposure to a range of assets from equities to real estate. The M&G share price is down 16% over 52 weeks, but I’m drawn to the whopping 9.4% dividend yield, which exceeds the FTSE 100 average of 3.9%.

This business has a strong presence in the UK and Europe. It’s been listed on the London Stock Exchange since a demerger from Prudential. As its operations are in developed markets, growth prospects may not be too exciting. In addition, the high price-to-earnings ratio above 60 is a risk. This reduces the stock’s value investment appeal.

Nonetheless, M&G delivered total capital generation of £2.8bn over two years — well ahead of the original target. Furthermore, a £500m share buy-back programme is a big positive. Overall, I see potential for healthy shareholder returns in the future. So, I’d add to my existing holding for my passive income portfolio.

Next, Morgan Sindall Group (LSE: MGNS) is a FTSE 250 construction stock. With a 5% dividend yield, it’s a solid passive income pick. The latest annual results are encouraging. Group revenue rose 6% to £3.2bn and adjusted operating profit increased 92% to £131.3m.

However, there are macroeconomic headwinds. The S&P Global/CIPS UK construction purchasing managers’ index scored 56.4 in May — a four-month low. This indicator measures construction activity in the British economy. The Morgan Sindall share price could struggle in an increasingly tough climate.

Yet the company has an impressive list of active projects from schools to residential developments. The long-term outlook remains positive for me. I’d buy.

A long-term passive income goal

It’s important for me to remember that dividends aren’t guaranteed. Although I’ve selected high-yielding stocks to buy, I think it’s safer to expect a 4% annual yield from my portfolio.

That leaves a total dividend portfolio target of £510,000, which I’d aim to reach by investing £1,000 per month. Assuming a 4% growth rate, I’d take 25 years. Of course, this calculation would change should my investments underperform.

Ultimately, the dividends should amount to £1,700 per month, allowing me to leave my capital untouched in retirement.

Boring but beautiful?

Somero Enterprises (LSE:SOM) is a share I already hold. It’s certainly not an exciting new tech start-up. It doesn’t have lofty ambitions to disrupt industries and change the world. The company specialises in a very niche business producing concrete levelling equipment for the construction industry. While this may not get anyone’s heart racing, Buffett would acknowledge that the company sticks at what it knows and avoids the volatility of more stimulating sectors.

In its recent annual report, it revealed a 51% increase in revenues alongside an 85% increase in net income. The company has streamlined business operations and increased net income at a greater rate than revenue, which is good news. However, 2020’s poor year most likely influenced some of this data.

Somero also had record cash at the end of 2021 and no long-term debt. This gives it liquidity and mobility to seize new investment opportunities and continue to grow over the next few years. I feel the company’s recent share buyback campaign would also be of interest to Warren Buffett who has applauded the use of share buybacks in the past.

While the business is subject to inflation-linked and future growth uncertainty, I still believe it has many of the attributes that Buffett looks for in an investment. Its 7.2% dividend yield makes me even more confident about this cheap UK listed share.

A construction company with strong foundations

Morgan Sindall (LSE:MGNS) is a leading construction and regeneration company. It operates within the national infrastructure, housing and urban regeneration sectors. And it has the strong financial fundamentals that Buffett looks for with cash of £460m comfortably exceeding debt of £110m.

Once again, Morgan Sindall is unlikely to deliver stunning returns year after year and shake up the construction industry. But it isn’t promising to. What the stock does offer is a fair return on equity of 20%, a strong balance sheet and a competent management team that has investors’ needs as a priority.

The stock is currently trading at a price-to-earnings (P/E) ratio of 11.3 and offers a 4% dividend yield, which suggests relatively good value. The business has also seen strong growth in the regeneration and housing sectors. This is expected to grow as the UK government pushes to build more houses and tackle the undersupply of housing.

Morgan Sindall does have exposure to inflationary risks. There’s an expected increase in the price of materials and lower future construction demand to deal with. However, it has adequate cash to deal with future risks.

Nobody can truly predict what Warren Buffett would invest in. However, these two stocks hold many of the same attributes as his previous successful investments. I’m considering adding to my Somero holding and opening a new position in Morgan Sindall to try and emulate Buffett’s incredible performance.

So, these are the UK shares I’d buy and hold for at least a decade to create and grow a passive income stream.

Two top UK shares

To choose what I think are the best two companies, I’ve looked for those with high dividend cover, a history of dividend and earnings growth and yields above 3%.

Meeting these criteria were UK shares such as MTi Wireless, Belvoir, Hargreaves Services, Domino’s Pizza, and Intermediate Capital, as well as a number of investment trusts.

But two other shares particularly caught my eye – Rio Tinto (LSE: RIO) and Morgan Sindall (LSE: MGNS). The former has an earnings per share (EPS) compound annual growth rate (CAGR) of 44.7% over the last three years. This is very high, and has helped underpin dividend growth. The dividend yield is already very high at around 10%, but it’s covered by earnings. Earnings cover the dividend by more than 1.5 times. Along with a reasonable price-to-earnings ratio (P/E) of six, Rio Tinto looks like a top buy-and-hold passive income share for me.

But mining is an industry with boom and busts and there’s a risk we’re at the top of a cycle right now. Yet with electric cars needing copper and other metals in increasing amounts, there’s going to be demand for Rio’s output for a long time to come.

The company digs for copper, aluminium, silver, gold, bauxite and diamonds, but it’s best known for iron ore. That makes it reliant on steel production and Chinese construction for further growth. This could be a risk, especially in light of the recent debt problems at Chinese developer Evergrande. 

The stock isn’t without risks and has environmental challenges to face up to. Nonetheless, looking from the point of view of creating passive income, it looks like a top share for me to buy right now and then hold for a decade. I’m very tempted to buy the shares.

Investing for passive income

Shares in construction and infrastructure group, Morgan Sindall, yield around 4% and are on a P/E of 10, indicating they could be quite good value. The three-year EPS CAGR is much less than Rio’s, but is still respectable at 12.3%. Also, the dividend – which has been growing well – is covered more than twice by earnings. All in all, it looks like a very promising passive income investment.

The group is doing well operationally and financially, which bodes well for the future. It recently reported record full-year results with double-digit profit growth being driven by a modest increase in revenues and improved operating margins. It had net cash of £358m as of 31 December 2021, which suggests a balance sheet in good shape. Again, I’m tempted to buy.

Rio Tinto and Morgan Sindall are my top picks to buy and hold for a decade to create a passive income from UK shares.

Levelling Up

Anybody who watches the news knows that levelling up is critical to this government’s vision. Morgan Sindall (LSE: MGNS) is a UK share that ought to benefit. It’s involved in construction, infrastructure and housing, so is well placed to help deliver the levelling up agenda. 

For a construction company, Morgan Sindall has good returns on capital employed, indicating that it’s a high-quality company and makes me more confident it’s a good investment. Revenue has also been growing consistently year-on-year, which is an encouraging sign of its resilience and good management.

Margins are understandably low because there’s little pricing power when it comes to infrastructure. Any mispricing of contracts can lead to the company losing money, so it’s a tricky industry. 

But on a P/E of 11.5, the shares aren’t expensive and the business seems robust. There could well be a boost from the Budget in the short term and I may therefore buy this stock.

More homes

A major priority for the government is housing. This is why Persimmon (LSE: PSN) could receive a boost this week and do well longer term.

The housebuilder has a lot of cash on the balance sheet, which will enable it to pay a growing dividend and invest in its land bank. It also would be a cushion against any unexpected downturn in the market. Sector-leading margins should also limit any share price fall, at least relative to other housebuilders,  in a market downturn.

To me, the big attraction with these shares (beyond government support for housebuilding) is the dividend yield. Persimmon shares currently yield an eye-watering 9%. Usually so high a yield would be a red flag. But I think this is an exception because Persimmon has so much cash and actually cut the dividend during the pandemic.

It’s worth noting though that housebuilding is cyclical. Persimmon has burnt through a few CEOs in recent years and has been known for poor workmanship. But I feel the benefits outweigh the risks. 

It has been a great income share for quite a while and I’m tempted to add some shares to my investment portfolio.

COP26

While there are some doubts about how successful COP26 will be, there’s no doubt climate change is an important issue. For the UK and other countries, like Japan, hydrogen increasingly is being seen as part of the answer. That should benefit ITM Power (LSE: ITM).

At its simplest, ITM Power is an energy storage and clean fuel group. Its fortunes though will be very tied to hydrogen and the adoption of that technology.

Now could be a good time to invest as the group has just raised £250m and the share price has been falling through much of this year. The shares are now better value than they were.

It’s undoubtedly still quite speculative given that it’s loss-making and hydrogen still isn’t widely used in energy. If I buy the shares, they’ll be only a small part of my overall portfolio as I feel they could be volatile in the short term.

I’m keen on the company’s good showing against value and quality indicators. And the balance sheet’s strong. Indeed, Morgan Sindall has carried a net cash position for several years. And it’s been getting bigger.

Barnstorming half-year results

At the beginning of August, the half-year results report packed some punchy figures. The firm presented the results by comparing them to the interims of 2019 — two years ago. And that neat trick stripped out the anomaly of the dent from the pandemic last year. So we can really see the underlying operational progress in action.

And the directors said in the report, the six-month trading period to 30 June delivered an outcome “substantially ahead” of pre-pandemic 2019 levels. For example, compared to the 2019 interims, revenue grew 10%. And adjusted earnings per share rose 45%.

Considering the challenges caused by the pandemic in the middle of that two-year period, I think those figures are impressive. And the firm delivered a top-quality cash performance too. The net cash figure on the balance sheet in June was £337m, up from just £114m over two years.

The pleasing results led the directors to ramp up the interim shareholder dividend by 43% compared to 2019. And that gives me confidence the management team is keeping shareholders involved in the company’s success.

Chief executive John Morgan pointed out that the directors upgraded profit guidance three times as the period rolled out. It seems the company had trouble keeping up with its own progress. And Morgan described “significant” operational and strategic momentum in all the firm’s activities.

He emphasised how important it is for the company to continue its focus on cash generation and the balance sheet. He reckons the process of maintaining a robust cash pile provides a “significant” competitive advantage. The directors can then make the “right” decisions for the business. And that includes positioning it for “continued sustainable long-term growth.” 

I think this is one of the best UK stocks to buy now

Looking ahead, Morgan thinks the bulging order book and ongoing trading strength will deliver “another strong performance by the Group in the second half.” And, overall, he’s “excited” by the opportunities ahead. And so am I. The ‘build back better’ theme governments are shouting about will likely help to create a healthy trading environment for the business in the coming years.

Meanwhile, the valuation looks undemanding. With the share price near 2,422p, the forward-looking earnings multiple for 2022 is just over 12. And that drops a bit if we adjust for the cash pile. But there’s also a handy anticipated dividend yield running near 3.6%.

But despite this rosy picture, I think there are particular risks worth bearing in mind. After all, the sector is cyclical and any future general economic downturn could hurt the business and my investment in the shares.

However, Morgan Sindall has a multi-year record of success. And I think it’s one of the best UK stocks to buy now for the recovery. So I’d embrace the risks to buy and hold it now for the long term.

The company has upgraded its profit guidance three times in the last six months. Profits for the first half of 2021 were 46% above the same period in 2019, before the pandemic hit. But despite these bumper results, the shares are falling today. I’m wondering if this is a buying opportunity for my portfolio — or if this could be the top for this FTSE 250 stock.

A strong performance

Morgan Sindall says trading was “substantially ahead of pre-pandemic 2019 levels” during the first half of 2021. Strong demand for infrastructure and affordable housing made a big contribution to growth. The order book was steady at £8.3bn, unchanged from the end of 2020.

This progress flowed through to profits. Adjusted pre-tax profit of £53.1m was 46% higher than during the same period in 2019. The business also continued to generate plenty of cash. Net cash at the end of June was £337m, up from £146m one year earlier.

Shareholders will get an interim dividend of 30p per share, which is an increase of 43%. That puts the stock on trade for a 3.2% yield this year.

Why I like MGNS

I normally steer clear of construction businesses, as they often have low profit margins and can run into trouble of projects overrun. But I am a fan of Morgan Sindall and have previously owned the shares (sadly, I sold them too soon).

Unlike some rivals, this company has steered clear of problems in recent years and delivered consistent growth. I think that one reason for this is that chief executive John Morgan is one of the founders of the business, and its second-largest shareholder.

Morgan’s 7.5% stake is worth around £85m at the current share price. I estimate that his dividend income this year could be more than £2.5m. Unlike hired managers on big salaries, Morgan’s own interests are closely aligned with those of his shareholders. That’s something I like.

Needless to say, I also think that Morgan Sindall is a very well-run business, with great financial discipline.

Morgan Sindall share price: what I’m going to do

Despite today’s strong results, the stock is down by about 4% at the time of writing.

In my view, this could be a signal that the market does not expect Morgan Sindall’s rapid growth to continue. Indeed, broker forecasts for 2022 and 2023 suggest profits will be broadly flat over this period.

That’s not a bad result, of course. But construction is cyclical, especially housing. After such a strong run, I feel that a more cautious view makes sense. Profits might be about to peak.

Although the shares still look cheap, on around 12 times forecast earnings, this ratio is based on record profits. If earnings fell to 2019 levels, Morgan Sindall would trade on a price-to-earnings of 15.

I may be completely wrong to worry. Morgan Sindall could keep growing for several more years. But I’m not comfortable investing in construction after such a strong run. I’m going to stay on the sidelines for now.

The shares were hit by the start of the pandemic. But prior to that, they’d been on a belting run. Those who bought two years ago are looking at a 120% profit. And the shares are up 280% in the past five years. Oh, and there have been dividends thrown in for good measure.

So could we be seeing a one-off post-Covid thing here? It does look more like a resumption of the upward climb that commenced mid-2019 and was brought back down by the virus. Prior to that, though, the shares had been flat for a few years. So what’s behind it all, and will the shares head even higher into August and beyond?

The FTSE 250 construction and regeneration firm’s July update told us it “anticipates that its full year results for 2021 will be significantly ahead of its previous expectations.”  The previous update in April had been very upbeat. And this time we heard that since then, “trading has been strong and the positive momentum across the group has continued to accelerate.“

Strong profit growth

With strong performance across all of its divisions, Morgan Sindall expects to report “profit before tax in the region of £53m, reflecting growth of c238% on the 2020 half year result and up c46% on the 2019 ‘pre-pandemic’ comparative period.” If that’s not good enough, at 30 June, net cash stood at £337m (vs £146m a year prior). And the group’s secured workload had reached £8.3bn.

That all sounds lovely, but what’s the catch? I mean, we’ve seen the Morgan Sindall share price soar on the back of growth expectations. And there’s always a catch with sky-high growth stocks, isn’t there?

One thing does concern me. The construction and urban regeneration business is a bit cyclical at the best of times. And right now, it looks like we’re getting into a post-lockdown boom. All those projects that were put on hold due to the pandemic are starting to see the light of progress again.

Morgan Sindall share price bubble?

So I fear the company might have a great 2021, and then see business slowing off in the following years. If that happens, the Morgan Sindall share price might be close to a peak right now. But at current levels, the shares are on a trailing P/E of around 15 based on 2019 results (leaving out Covid-hit 2020).

If earnings per share in 2021 comes in significantly ahead of 2019, that P/E could fall significantly, and Morgan Sindall’s valuation might end up looking too low. And we might not be seeing an over-heated growth bubble after all. On balance, Morgan Sindall makes it on to my list of buy candidates. I’m keenly awaiting those H1 results now.

Rupert Hargreaves: Morgan Sindall

As the UK economy recovers from the pandemic, the construction sector seems to be taking off. As such, I’d buy Morgan Sindall (LSE: MGNS).

As one of the country’s largest construction groups, the firm looks set to benefit from rising activity in the sector.  Indeed, according to a recent trading update, the firm expects to report profit-before tax in the first half of its financial year 46% above 2019 levels. Its backlog has also continued to grow. It is up 5% compared to the year-ago period.

These figures are encouraging, but the construction industry can be volatile. So, Morgan’s fortunes for the year could still change.

Nonetheless, with revenues expanding, I’d buy the stock today.

Rupert Hargreaves does not own shares in Morgan Sindall.

Edward Sheldon: Unilever

My top British stock for August is consumer goods giant Unilever (LSE: ULVR).

Unilever’s share price took a hit in July after the company published its half-year report. Investors didn’t like the fact that earnings were impacted by cost inflation.

I think this share price pullback has provided a nice entry point. Overall, the results showed that Unilever is heading in the right direction. Sales growth came in at 5.4%, while e-commerce sales were up 50%.

With the stock now trading on a forward-looking P/E ratio of less than 20 and offering a prospective yield of around 3.5%, I think it’s a good time to be buying.

Edward Sheldon owns shares in Unilever.

Kevin Godbold: IMI

IMI (LSE: IMI) makes “highly engineered” products such as actuators and valves.

The business scores well against quality indicators, such as return against equity and operating margin. There’s a robust record of operating cash flow and earnings barely faltered through the pandemic. Looking ahead, City analysts have pencilled in a double-digit percentage increase in earnings for 2022.

With the stock near 1725p, the forward-looking earnings multiple is around 18. That’s not cheap and the valuation adds risk for shareholders. But IMI has earned its rich rating. And I’d want it in my portfolio for August and beyond.

Kevin Godbold does not own shares in IMI.

Royston Wild: The Vitec Group 

The Vitec Group’s (LSE: VTC) share price has risen strongly over the past 12 months. And I think that the UK engineering share could gain more ground when first half results are posted on Thursday, 12 August.  

Demand for Vitec’s cameras and broadcast equipment is soaring right now. The firm saw product orders rocket 50% to record levels in the five months to May, it said in its latest statement. And this prompted the business to upgrade its forecasts for the full year.

It’s true that electronic equipment shortages could hamper Vitec’s sales recovery. However, I believe this risk is baked into the share price right now. Today the small cap trades on a forward price-to-earnings growth (PEG) ratio below 0.1. 

Royston Wild does not own shares in The Vitec Group.

Paul Summers: ASOS

Following the huge (overdone) fall of its share price in July, my top stock for August is fast-fashion firm ASOS (LSE: ASC). 

Sure, the company faces some near-term issues relating to its supply chain and slowing sales. There’s also the threat of an online sales tax to consider. However, the stock hasn’t been this cheap since last September. Margins are slowly improving and newly acquired brands will help boost growth in time. 

I’m confident this AIM-listed star will shine again once travel restrictions are lifted and we need fresh wardrobes for holidays. 

Paul Summers has no position in ASOS

Zaven Boyrazian: BP

With the world shifting to renewable energy solutions, BP (LSE:BP) is transforming itself into one of the largest green energy providers over the next decade. Its existing portfolio heavily relies on oil. However, due to increased environmental pressure, that may soon no longer be the case.

It’s already investing in wind, solar, bio and hydrogen energy solutions. And BP estimates it will be generating 50GW by 2030. That’s roughly enough to power 15 million homes.

The transition undoubtedly has risks that could cause short-term disruptions to profits. But over the long term, I believe BP stock and its 5.4% dividend yield will continue to rise in August and beyond.

Zaven Boyrazian does not own shares in BP.

Nadia Yaqub: Aviva

A lot has been happening at Aviva (LSE: AV). The new CEO, Amanda Blanc joined the firm last year. It has also been disposing of assets to focus on its core businesses. And the insurance company announced that it’s going to be making a substantial capital return to stockholders.

I like that the Board is shareholder friendly. Further details on this capital distribution will be released later on in the year. In my opinion, things are changing for the better. The shares pay a dividend yield of 7% and are trading on a cheap price-to-earnings (P/E) ratio of 7x.  

Nadia Yaqub does not own shares in Aviva

Roland Head: B&M European Value Retail

Discount retailer B&M European Value Retail (LSE: BME) has performed well over the last 18 months. Its stores qualified as essential retail and remained open, enjoying bumper trading.

Since its IPO in 2014, B&M has consistently been more profitable than the big supermarkets. I expect this to continue, even as the boost from Covid-19 fades away.

The main risk I can see is that B&M’s success will attract increased competition. So far, I don’t see much sign of this.

B&M’s share price has pulled back recently, as the market prices in slower growth. I think that’s left this business looking very affordable.

Roland Head has no position in B&M European Value Retail.

Tom Rodgers: Grafton Group

I see Grafton Group (LSE: GFTU) as one of the best FTSE 250 stocks to buy in August. The building materials and DIY retailer has profited from the home refurb boom and early shareholders have been rewarded with a 70%+ share price growth in 12 months.

I see much more upside on the cards, however, because the well-run business raised its profit forecast on 8 July after a strong first half of the year. Its buyout of Finland’s workwear distributor IKH also adds another income stream for 2021. Now seems to be a good time to buy to cash in on these profits. 

Tom Rodgers does not own shares in Grafton Group

Christopher Ruane:  Lloyds

High street bank Lloyds (LSE: LLOY) has recently slowed down after a strong share price performance this year. It’s up a third in 2021 and 60% over the past 12 months.

I see a buying opportunity. A possible price driver is the likelihood of a growing dividend. The bank has committed itself to a progressive dividend policy. It is now sitting on excess capital which could help fund it.

Any weakening in the housing market is a risk. As the UK’s leading mortgage provider, Lloyds is heavily exposed to housing.

Christopher Ruane owns shares in Lloyds.

G A Chester: Centamin 

The share price of gold miner Centamin (LSE: CEY) has more than halved since this time last year. It’s been the victim of two common risks that can dent such a stock. Namely, a weakening of the price of gold and an operational setback. 

However, I can see two reasons for optimism right now. First, continuing massive money printing by governments should be supportive of the gold price. Second, Centamin appears to have stabilised operations. 

It reiterated its production and costs guidance for 2021 in a report on 22 July. I reckon further positive noises in its half-year results on 5 August could see returning investor interest in the stock. 

G A Chester has no position in Centamin.

Manika Premsingh: BP

The FTSE 100 oil biggie BP (LSE: BP) will release its second quarter results at the start of August. They could come in strong. We need to look no farther than crude oil prices to know this, which are at pre-pandemic levels. Companies like BP are direct beneficiaries of this trend, as was already visible in the quarter before. The numbers could look better purely because of base effect as well. The same time last year was one of high restrictions, so there was little travel demand and oil prices were relatively low.

I reckon that its share price can rise as results come in, particularly if there are positive developments on the dividend front.

Manika Premsingh owns shares of BP

The surging Morgan Sindall share price

The business is a leading construction and regeneration company that focuses on developing infrastructure within urban environments. Its projects range from affordable housing to office refurbishment and highway construction. Its projects are split across five different divisions which, according to the latest trading update, have grown substantially.

With lockdown restrictions being eased as the vaccine rollout continues, many delayed construction projects are now back in full force. Its Fit Out division that focuses on renovating commercial office spaces has grown its order book to a record high of £581m. Meanwhile, Property Services and Construction & Infrastructure are both seeing strong margin improvements. Consequently, the group has seen its profits before tax surge to £53m. That’s a 238% boost compared to last year and a 46% rise compared to pre-pandemic levels.

As a result of this stellar performance, management said it “anticipates that its full-year results for 2021 will be significantly ahead of its previous expectations”. So seeing the Morgan Sindall share price take off seems is understandable to me.

The risks that lie ahead

As encouraging as this latest report was, there remain several risks to consider. One of the main threats to the business continues to be Covid-19. The vaccine rollout has indeed progressed relatively quickly in the UK. However, due to lockdown restrictions being eased, the level of infections is on the rise. In fact, the infection rate is close to its highest point since the pandemic began. This may result in lockdown restrictions being reintroduced, which would likely lead to new project delays. Needless to say, that would be bad news for profits and, in turn, for Morgan Sindall’s share price.

But even if new lockdowns do not happen, the business is still threatened by the pandemic regarding its supply chain. To ensure that construction materials arrived on time, management has had to loosen credit check requirements for suppliers. So far, this has allowed the supply of materials to keep flowing. However, with dependence on suppliers that haven’t had such rigorous credit checks, the risk of supply chain disruptions may have actually increased. After all, if a supplier goes bankrupt, project delays are inevitable. And once again, that could have some significant impact on the Morgan Sindall share price.

The bottom line

While there are some substantial risks, most of these look like short-term problems to me. When considering the growth that this business has delivered so far, the risk matches the reward in my eyes. Therefore, I would consider adding Morgan Sindall to my portfolio even after the recent share price boost.