It’s been a bruising few years for the Barratt Redrow (LSE: BTRW) share price. It has crashed 44% over 12 months, and 66% over five years. That leaves the FTSE 100 housebuilder trading at a 13-year low. So why should I alert you to a stock like this – except as a warning?
Here’s the reason. I think there’s an exciting opportunity to buy Barratt Redrow at a bargain price, and grab a bumper dividend yield too. But it’s not for everybody.
What went wrong with this FTSE 100 stock?
Years of near-zero interest rates drove house prices to unaffordable highs, leading to big affordability issues when the cost-of-living crisis finally drove up mortgage rates. The end of the Help to Buy scheme in 2023 further dampened demand.
Surging inflation also pushed up the cost of building materials, while the government hiked both employer’s National Insurance bills and the minimum wage. Post-Grenfell cladding compensation brought still more costs. When 2026 began, there were hopes things would ease, but then the Iran war kicked off and inflation fears returned all over again.
We could put this down to bad luck, but it is not just that. Housebuilders are often at the sharp end of wider economic volatility. They produce relatively small numbers of high-value products and are highly sensitive to shifts in sentiment, interest rates, and policy.
Looking at the last five years of Barratt Redrow’s underlying pre-tax profits shows just how bumpy things have been:
2025 – £488.3m
2024 – £385m
2023 – £884.3m
2022 – £1,054.8m
2021 – £919.7m
I should note that the 2025 figure includes the acquisition of Redrow in August 2024. Otherwise, it would have been £591.6m.
Barratt Redrow shares have taken a beating, but the underlying balance sheet and business are relatively solid. Its Q3 update (April 15), showed a 13% increase in its order book to £3.5bn, with full-year completions expected to come in between 17,200 and 17,800. Underlying pre-tax profits are expected to rise 16% to £568m.
Can the housing market recover?
The big problem is that nobody really knows what happens next, either in the Middle East or in the UK economy and housing market. What is clear is that the stock is pricing in a good deal of risk, with a modest price-to-earnings ratio of 9.9. Thanks to its share price decline, the trailing dividend is a chunky 6.75%.
However, the forecast yield for 2026 is lower at 5.69%, reflecting February’s cut to the interim dividend. But investors willing to look beyond the group’s current troubles may see a profitable, high-yielding business that could re-rate strongly if conditions improve.
Analysts are optmistic. The 12-month consensus share price forecast is 370p. If correct, that would represent an eye-popping increase of 42% from today’s 261p. With the dividend, the total return would head towards 48%. No promises, of course. But there is potential here – Barratt Redrow just needs the right conditions to unlock it. It’s well worth considering, for investors who are willing to be patient. I’ll be keeping a close eye on both the stock and the wider housebuilding sector, and suggest you do the same.
Should you invest £5,000 in Barratt Redrow right now?
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Harvey Jones does not hold any positions in the companies mentioned.
