4 Stocks In Household Space With Tempting Dividends - BDEV, BKG, TW And CSP

4 Stocks In Household Space With Tempting Dividends - BDEV, BKG, TW And CSP

Barratt Developments

Barratt Developments PLC (BDEV) is Coalville, the United Kingdom based holding company. The group engages in acquiring and developing the land, obtaining planning consents, and constructing residential property developments and selling the homes, which is built by it throughout Britain. The group's operations are differentiated in two segments: Housebuilding and Commercial developments.

Trading Update

During the financial year ended 30 June 2019, the company’s reported wholly owned completions were up by 2.6% to 17,111 homes, while total homes completed including joint ventures were 17,856 homes (2018: 17,579 homes). Despite underlying house price inflation, changes in the mix helped the company to report total average selling price for the year of approximately £274k (2018: £288.9k). Driven by the benefits of the new product range delivery and sites purchased at higher gross margins, underlying operating margin improvements was around 120 bps, as the company expects to deliver an operating margin of around 18.9% (2018: 17.7%). Reflecting contribution from joint ventures, a strong close to the year and continued strong progress from margin initiatives, profit before tax is expected to surpass the market expectations at around £910 million. As at 30 June 2019, the Group had a net cash balance of approximately £765 million and total forward sales (including JVs) was £2,604.1 million, indicating a strong forward sales position.

Financial Highlights (1H FY 2019, in £m)

(Source: Company Filings)

Helped by the company’s new Cambridgeshire division, which is now fully operational, total completions for the period increased by 4.1% to 7,622 homes, against 7,324 homes in First Half FY 2018. The revenue increased by 7.2% in H1 FY 2019 to £2,132 million, up from £1,988 million in H1 FY 2018. The gross margin also increased by 200 bps to 22.6% in H1 FY19 vs 20.6% in H1 FY18. This reflects the benefits of the hurdle rate of a minimum of 23% gross margin used by the company to buy new land. The profit from operations rose by 15.3% to £409.7 million, against £355.2 million in the corresponding period of FY 2018, while profit before tax increased to £408 million in H1 FY19 from £342.7 million in H1 FY18. The operating margin also rose by 130 bps to 19.2%, reflecting higher gross margins of new land purchased and the benefits of the new product range. The basic earnings per share rose by 20.7% to 32.7 pence. The company’s balance sheet remains strong with £387.7 million net cash, against £165.9 million in H1 FY 2018. Net tangible assets also grew by 8.2% to £3,659.5 million from £3,375.5 million on 31 December 2017.

Share Price Commentary

Daily Chart as at July-15-2019, before the market closed (Source: Thomson Reuters)

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On 15 July 2019, at the time of writing (before the market closed, GMT 8:57 am), BDEV shares were trading at GBX 633.6, up by 1% against the previous day closing price. Stock's 52 weeks High and Low is GBX 635.40/GBX 430.00. The company's stock beta was 0.73, reflecting less volatility as compared to the benchmark index. Total outstanding market capitalisation was around £6.35 billion.

Dividend

In the first half of FY 2019, an interim dividend of 9.6 pence per share was announced by the company, an increase of 11.6% and in line with the policy of paying ordinary dividends covered 2.5 times by earnings. Additionally, the company plans to pay £175m in November 2019 and November 2020 as part of the capital return plan. As on 15 July 2019, the dividend yield of the company was 4.39%.

Berkeley Group Holdings

Berkeley Group Holdings PLC (BKG) is a British property developer which operates across London, Birmingham and the South of England. The group consists of six independent companies, namely St William, St Joseph, St James, St George, St Edward and Berkeley Homes. Over the last five years, the company has built 19,500 homes and employs 11,000 personnel at its sites.

Financial Highlights (FY 2019, in £m)

(Source: Company Filings)

As the company sold 3,698 new homes across London and the South East at an average selling price of £748,000, revenue during the year was £2,957.4 million, up by 4.1% from £2,840.9 million reported in FY 2018. Gross profit declined by 5.8% to £926.2 million, and the changes in the mix of properties sold in the year led to a decline in gross margin from 34.6% in FY18 to 31.3% in FY19. Operating profit also declined by 5.9% to £768.4 million leading to an operating margin of 26%, down from 28.8% in FY 2018, reflecting resilient trading in the year and remaining at top end of market expectations, profit before tax was £775.2 million, though it declined by 20.7% as the share of the results of joint ventures was a profit of £8.8 million only. Basic earnings per share have decreased by 18.1% from 587.4 pence in FY18 to 481.1 pence in FY19, and pre-tax return on equity for the year was 27.9%, compared to 41.9% last year. Net asset value per share was up by 18.9% to £23.05, and net cash was £975.0 million.

Share Price Commentary

Daily Chart as at July-15-2019, before the market closed (Source: Thomson Reuters)

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On 15 July 2019, at the time of writing (before the market closed, GMT 9:00 am), BKG shares were trading at GBX 3,853, up by 0.23% against the previous day closing price. Stock's 52 weeks High and Low is GBX 3,993.97/GBX 3,170.00. The company's stock beta was 0.61, reflecting less volatility as compared to the benchmark index. Total outstanding market capitalisation was around £4.88 billion.

Dividend

During the year, the company will pay dividend worth £53.0 million and £198.9 million will be returned by share buy-backs, as the company aims to return £251.9 million to shareholders. As on 15 July 2019, the dividend yield of the company was 1.05%.

Taylor Wimpey

Taylor Wimpey PLC (TW) is a United Kingdom-based residential housing developer which operates at a regional level from 24 local offices across the country. It is one of the UK's largest residential developers and builds a wide range of properties, with a broad price range. The company’s operations are differentiated in two geographical segments: Housing United Kingdom and Housing Spain. The Housing United Kingdom segment is further sub-divided into North, Central and South West, London and South East (including Central London) and Corporate.

Trading Statement

For the period 1 January 2019 to 25 April 2019, the company reported that the housing market remained stable despite wider macroeconomic uncertainty. Demonstrating continued progress in optimising larger sites, and ahead of expectations, the company reported that average private sales during the year to date were 1.03 per outlet per week, while cancellation rates remained low at 13%. Total order book value was approximately £2,399 million as at week ending 21 April 2019, indicating a strong order book. Due to exchange rates impact on the cost base of suppliers and underlying cumulative inflation, the company expects to build cost inflation for 2019 to be around 5%. After dividend payments of approximately £600 million, net cash position at the end the year is expected to be £500 million.

Financial Highlights (FY 2018, in £m)

 (Source: Company Filings)

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The company reported an increase of 2.9% in total revenue to £4,082.0 million, compared to £3,965.2 million in 2017, it was driven by improved completions both in Spain and the UK. Operating profit rose by 4.3% to £880.2 million (2017: £844.1 million), resulting in an operating profit margin of 21.6%, against 21.3% in 2017. Margin declined slightly because of the negative impact of selling and build cost inflation. In FY18, profit before tax and exceptional items surged by 5.5 % to £856.8 million against £812.0 million reported last year, driven by better operational results and lower net finance costs. Profit for the year rose to 18.2% during FY18 to £656.6 million vs £555.3 million in FY17, due to the decrease in the post-tax exceptional charges and improvement in performance. The company’s adjusted basic earnings per share was 21.3 pence in FY2018 as compared to 20.3 pence in FY2017. Basic EPS was up by 18.2% to 20.1 pence in FY18 as compared to 17.0 pence in FY17.

Share Price Commentary

Daily Chart as at July-15-2019, before the market closed (Source: Thomson Reuters)

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On 15 July 2019, at the time of writing (before the market closed, GMT 9:02 am), TW shares were trading at GBX 164.64, up by 0.4% against the previous day closing price. Stock's 52 weeks High and Low is GBX 180.51/GBX 119.72. The company's stock beta was 0.93, reflecting slightly less volatility as compared to the benchmark index. Total outstanding market capitalisation was around £5.38 billion.

Dividends

Taking the total ordinary dividend for the year to 6.24 pence per share, the company paid an ordinary dividend of 3.8 pence per share, representing a rise of 32%. The company also paid a special cash dividend of 10.7 pence per share, which was higher than 10.4 pence per share paid in July 2018 and totalled to around £350 million. As on 15 July 2019, the dividend yield of the company was 3.81%.

Countryside Properties

Countryside Properties PLC (CSP) is United Kingdom-based home builder and regeneration partner, which delivers private, affordable homes in partnership with local authorities or on land owned or controlled by the company. The company’s business is differentiated into two divisions: Housebuilding and Partnerships.

Financial Highlights (H1 FY2019, £m)

(Source: Company Filings)

Driven by an increase in regional businesses in the North and Midlands, average selling price reduced by 4% to £377,000, against £392,000 in half year 2018, while total completions were up by 43% to 2,362 homes. On a reported basis, revenue rose by 27% to £507.0m (HY 2018: £398.8m), while total adjusted revenue increased by 20% to £563.7m (HY 2018: £468.0m). On a reported basis, operating profit decreased by 5% to £60.2m and adjusted operating profit increased by 11% to £89.4m (HY 2018: £80.6m). Adjusted basic earnings per share climbed by 9% to 15 pence against the 13.7 pence in H1 FY18, due to the growth in adjusted earnings in the current period.

Share Price Commentary

Daily Chart as at July-15-2019, before the market closed (Source: Thomson Reuters)

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On 15 July 2019, at the time of writing (before the market closed, GMT 9:05 am), CSP shares were trading at GBX 297.41, down by 0.46% against the previous day closing price. Stock's 52 weeks High and Low is GBX 356.00/GBX 265.60. The company's stock beta was 1.02, reflecting the same volatility as compared to the benchmark index. Total outstanding market capitalisation was around £1.34 billion.

Dividends

As against the previous target of 30 per cent of adjusted earnings, the company increased the dividend to 40 per cent of adjusted earnings, keeping in mind strong cash generation in the business and confidence in its mixed-tenure delivery. Accordingly, the company recommended an interim dividend of 6.0 pence per share, increasing from 4.2 pence declared last year. As on 15 July 2019, the dividend yield of the company was 4.22%.

 

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