I think Vistry Group (LSE: VTY) is a very-attractive UK dividend share at today’s prices. The housebuilder trades on a rock-bottom forward price-to-earnings (P/E) ratio of 9 times. The FTSE 250 firm boasts a chunky 5% dividend yield for 2021 too. This is one of the best readings among all of the housebuilding stocks.
I own shares in a couple of London-listed housebuilders (Barratt Developments and Taylor Wimpey of the FTSE 100). But I won’t claim that such stocks don’t carry their fair share of risk. Most immediate is the threat of a long and severe downturn in the British economy. The likelihood of elevated unemployment and flat wage growth in this scenario would weigh heavily upon homes demand.
Other industry-specific problems that could damage earnings growth at UK shares like Vistry also exist. They have the problem of construction materials and labour shortages that could dent build rates and push up costs. There’s also the prospect of development problems that can lead to substandard homes being built. Vistry itself (or Bovis as it was then known) was hit by claims of selling shoddy properties in 2016. It was forced to cut production as it refocused on quality over quantity to reassure buyers.
A UK dividend share with 6% yields!
Having said all that, I’ve still held my shares in Barratt and Taylor Wimpey. I remain convinced that the profits outlook for such UK shares, including Vistry, remains bright for the next 10 years at least. Britain doesn’t have enough new homes to go around, not by a long chalk. These companies will be needed to lead the charge to keep the country’s growing population suitably housed. Don’t forget government plans to create around 300,000 new homes a year by the middle of the decade.
It’s also probable that banks and building societies will continue offering ultra-low mortgage rates to customers. This is not just because I think the Bank of England will keep interest rates locked around current record lows. Intensifying mortgage product wars among Britain’s lenders should help customers tackle the monthly cost of owning a home too.
I think that huge government support to help first-time buyers onto the homes ladder will remain in place too. Schemes like the Help to Buy equity loan scheme and specialised ISAs aren’t going anywhere any time soon. And speculation abounds that the government will announce a mortgage guarantee scheme to help buyers in this week’s Budget. It’s hoped the programme will lead to 95% mortgages returning to the market en masse.
As I say, Vistry offers a bulky 5% yield for this year. Its underpinned by expectations that annual earnings will soar 125% in 2021. And City analysts expect the good news to keep coming. Another 20% profits rise is anticipated for next year, a prediction which leads to hopes of more dividend growth. As a result the yield at this UK share marches to a mighty 6.1%.
