4 dividend-paying FTSE construction stocks to buy now

Highlights

• In August 2021, growth in the UK’s construction and housebuilding sector was impacted by the severe supply chain disruptions caused by HGV driver shortages.
• IHS Markit/CIPS UK Construction PMI® Total Activity Index posted 55.2 in August 2021, a decline from 58.7 in July 2021.
• Construction businesses are optimistic about growth prospects in the coming year, on the back of rising new contracts across all subsectors of the construction industry.

In August 2021, growth in the UK’s construction and housebuilding sector was impacted by the severe supply chain disruptions caused by HGV driver shortages, which resulted in sharp rise in costs. CIPS UK Construction PMI® Total Activity Index by IHS Markit was 55.2 in August 2021, down from 58.7 in July 2021. Markit's construction PMI survey showed a sharp increase in prices. However, economists point out that the signs of a slowdown in the construction sector are not alarming, as the building and construction sector was among the first to recover to pre-COVID levels.

The construction sector in the UK grew at the slowest pace since February due to restrictions in materials supply, and the shortage of transport impacted the overall construction activity in the country. Staff and material prices rose as a result of a shortage of overseas workers and skilled staff. Higher wages of experienced staff and a short supply of materials further imposed inflationary pressures. According to the survey, about 84% of the interviewed supply chain managers paid higher for their purchases.

Among the categories of construction output, commercial work with an index value reported at 56.0 demonstrated the best performance in August 2021. This was followed by housebuilding (55.0) and civil engineering (54.8). The construction business in the UK registered a resumption of delayed projects due to Brexit and the pandemic, despite being impacted by volatility in raw material supply and associated high costs. Nevertheless, construction businesses are positive about growth prospects in the coming year, on the back of rising new contracts across all subsectors of the construction industry.

(Data Source: Refinitiv)

Here we take a look at 4 FTSE construction stocks and explore the investment prospect in them.

CRH Plc (LON: CRH)

FTSE 100 listed CRH is a diversified building materials business based in Dublin, Ireland. For H1 2021, CRH recorded sales revenue of $14.0 billion, registering a year-on-year growth of 15% compared to H1 2020, and EBITDA stood at $2.0 billion in H1 2021 compared to $1.6 billion in H1 2020. The group’s profit before tax stood at $1.0 billion in H1 2021 compared to $0.5 billion in H1 2020.

CRH’s board announced an increase in the interim dividend to US23.0 cents per share, up by 4.5% in the previous year.

The shares of CRH traded closed at GBX 3,824.00 on 6 September 2021. The company’s shares gave a return of 39.56% in the last one year to shareholders, and the market capitalisation stood at £29,780 million.

Balfour Beatty Plc (LON: BBY)

Balfour Beatty is an international infrastructure company that offers construction and related support services and infrastructure investments. In August 2021, a consortium led by Balfour Beatty was selected for a $44 million project to extend the Jacksonville, Florida skyway from a length of 2.5 miles to 10 miles.

For the half-year ended 2 July 2021, Balfour Beatty’s order book stood at £16.1 billion (FY 2020: £16.4 billion). The company’s underlying profit from operations (PFO) was £60 million in H1 2021 compared to the loss of £14 million in H1 2020. It also recorded average net cash of £611 million in H1 2021 compared to £527 million in H1 2020.

Balfour Beatty’s board fixed an interim dividend of 3.0 pence per share for the period in 2021, which is about 43% higher than the pre-pandemic level that is 2.1 pence per share in 2019.

The shares of Balfour Beatty last traded at GBX 296.60 on 6 September 2021. The company’s shares gave a return of 30.09% in the last one year to shareholders, and the market capitalisation stood at £1,915.00 million.

Breedon Group Plc (LON: BREE)

Breedon Group is one of the major construction materials companies in Ireland and Great Britain. For the H1 ended 30 June 2021, Breedon recorded revenues of £600.9 million compared to £335.3 million in H1 2020. It recorded a free cash flow of £34.3 million in H1 2021 compared to £41.5 million in H1 2020.

Breedon’s board finalised a dividend payout of 0.5 pence per share for shareholders for H1 2021.

The shares of Breedon Group closed at GBX 105.20 on 6 September 2021. The company’s shares gave a return of 32.33% in the last one year to shareholders, and the market capitalisation stood at £1,777.20 million.

Marshalls Plc (LON: MSLH)

Marshalls is a UK-based manufacturer of hard landscaping and supplier of superior natural stone and concrete products for the home improvement, landscape and construction markets. For the half-year ended 30 June 2021, the company recorded revenues of £298.1 million compared to £210.5 million in H1 2020. The company’s profit before tax increased to £38.9 million from £1.6 million in H1 2020.

Marshalls’ board fixed an interim dividend payout of 4.70 pence per share for shareholders for H1 2020, payable on 1 December 2021.

The shares of Marshalls last traded at GBX 840.50 on 6 September 2021. The company’s shares gave a return of 26.96% in the last one year to shareholders, and the market capitalisation stood at £1,681.44 million.

Bottom line

The supply chain inadequacies and a resulting surge in prices of workers and raw materials have temporarily impacted construction sector growth in the country.  However, construction businesses in the country are optimistic about growth prospects in the coming year due to consistent new contracts across all subsectors.