A Cheap, Dividend-Paying UK Share You Should Buy This Week And Hold Until 2030!
As a stock investor myself I have exposure to Britain’s housebuilding sector. I own shares in FTSE 100 giants Barratt Developments and Taylor Wimpey. And I plan to hold onto them through the next decade at least. I consider Bellway to be another great builder for UK share pickers to own. And especially with a new trading update around the corner (on Friday, December 11).
FTSE 250-quoted Bellway certainly cheered the market last time out in October. It said that reservations had soared almost 31% year on year during the nine weeks from August 1. Meanwhile its forward order book stood at record highs a shade below £1.9bn.
A UK Share On The Mend
The likes of Bellway were battered earlier this year as Covid-19 put the homes market on ice and caused its workers to down tools. But Britain’s mid-tier housebuilders are showing signs of having turned the corner. As the boffins at broker Canaccord Genuity recently commented: “we expect 2021 to be a year of significant profit recovery with volumes being much closer to normalised levels and pricing firm.”
Home construction on Britain’s shores has long failed to keep up with the strength of demand. This has supercharged demand for the newbuild properties of Bellway and its peers. And a combination of supportive factors means that homebuyer appetite should remain strong.
Huge government support like the Help to Buy ISA and equity loan schemes will support first-time buyers for years to come. And the low Bank of England interest rates that have fed through to affordable mortgage products will have to be kept in place to aid the post-coronavirus economic recovery.
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Stamp Duty Extension?
An extension of the recent Stamp Duty holiday would also drive demand for Bellway’s products in 2021.
The state placed a moratorium on the property tax (which is paid by property and land buyers in England and Wales for transactions of £125,000 and above) until the spring. It’s what has helped house price growth rocket in recent months. Latest data from the Halifax building society showed average UK house prices soar 7.6% in November, the largest year on year rise since June 2016.
Calls from the property industry are already growing for the Stamp Duty holiday to continue beyond its current expiration date. And the government will face increasing pressure to extend the scheme as a Covid-19 hangover materialises and Brexit crosses the line.
Profits Poised to Rebound!
So what does all this mean for Bellway’s bottom line in 2021? Well City analysts reckon profits at the homebuilder will fly 73% higher in the financial year ending July 2021. And this makes the UK share a perfect buy for value investors — the projection leaves it trading on a bargain-basket forward price-to-earnings (P/E) ratio of 11 times.
On top of this, expectations of a strong return to earnings growth means that brokers expect a near-doubling in the annual dividend to around 95p per share. This creates a chunky 3.2% yield for investors to sink their teeth into. Bellway clearly offers a lot for investors to get excited about. And I’d buy it ahead of those new trading numbers set for Friday.