The UK is in a pickle but that isn’t going to stop me from buying cheap shares. In fact, I see it as a good time to do so.

The FTSE 100 has dropped below 7,000, after the Bank of England’s battles to prevent a pension fund meltdown and another sterling collapse. It trades at 6,913 as I write this, a drop of 7.89% year-to-date.

It has fared better than the US S&P 500, which is down a brutal 24.49% this year. The FTSE 100 is full of solid, undervalued dividend stocks in sectors like banking, utilities, mining, consumer staples and energy. By contrast, the S&P 500 is packed with overvalued growth stocks that are struggling as sentiment plummets.

I’m looking for cheap shares now

Yet the FTSE 100 has dropped far enough to offer me real value. Some of my favourite shares are available at astonishingly low valuations, as measured by the price/earnings ratio.

Anglo American is trading at 4.2 times earnings and yields a staggering 9.54%. That offsets most of this year’s inflation surge. Like any stock, it is not without its risks. The slowing Chinese economy is hitting demand for raw materials. Given today’s dirt-cheap valuation, that is a risk I’m happy to take.

I’m also tempted by housebuilder Barratt Developments, which is valued at a meagre 4.1 times earnings and yields an amazing 10.8%. Again, there’s a reason why this share is cheap.

UK interest rates look set to rise sharply and this will drive up mortgage costs, forcing some owners to sell as they can’t manage repayments. House prices are likely to fall to match the new reality of higher borrowing costs. 

Pharmaceutical giant GSK, formerly GlaxoSmithKline, looks tempting too. Currently, it’s valued at just 11.99 times earnings while its yield has rocketed to 7.12%.

GSK even enjoyed a share price boost this week after its whooping cough vaccine was approved for use in pregnant women in the US. Yet it also faces a specific risk, with a potential $5bn litigation cost for stomach acid treatment Zantac, which may elevate cancer risk. This may not be resolved for several years, weighing on the share price.

FTSE 100 shares at tempting prices

These are big businesses with solid core operations that are astonishingly cheap. That makes me tempted to buy them (although I’ll need to explore GSK’s Zantac issue further).

2022 has been a tough year for markets and the UK now looks set to fall into recession, which could last for all of 2023. Despite all the problems, that won’t stop me from buying shares today for two reasons.

First, wider stock market movements are impossible to predict, so I don’t even try. Second, because I’m investing for a minimum of 15 to 20 years. Over such a lengthy period, any shares I buy today have plenty of time to recover.

The sooner I buy cheap shares like these, the sooner I can start reinvesting their dividends to purchase more stock. By the time the recovery comes, my holdings will be bigger, and with luck I will reap the rewards.

The post Today’s financial crisis is the perfect moment to buy cheap shares appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Harvey Jones doesn't hold any of the shares mentioned in this article. The Motley Fool UK has recommended GSK plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The State Pension isn’t enough to secure a fun-packed retirement, and I’ll supplement mine by building a passive income from shares.

My chosen way of doing this is to invest in dividend-paying FTSE 100 stocks, as they offer some of the most generous shareholder payouts in the world. Today, the index yields a steady income of 3.93% a year. That should rise over time, as companies listed on the index look to increase their dividends as profits rise.

This is how I’m building passive income

Some FTSE 100 stocks would give me a far higher passive income than that. Mining giant Anglo American currently yields 9.07% a year, while insurer Aviva offers income of 8.73% and Barratt Developments yields 8.81%. All three are dividend aristocrats, and I haven’t even got past the Bs.

The FTSE 100 is fertile ground for investors like me, who want the highest possible passive income in retirement.

These yields are not guaranteed though. As we saw in the financial crisis and again during the Covid pandemic, companies can cut them in times of trouble. Yet management will only do that in extremis, because investors don’t like it.

Let’s say I invested in a spread of FTSE 100 stocks, so I bagged that average yield of 3.93% (even though I reckon I could do better).

Now assume I wanted to generate £1,000 a month of passive income, which adds up to £12,000 a year. To achieve that, I would need to build an investment portfolio of £305,344. So that’s the capital target I have to aim for.

Of course, if I drew my passive income from a pool of FTSE 100 offering higher yields, I could generate the same passive income from a smaller portfolio. If my stock picks yielded on average 6% a year, I could generate £1,000 a month from a portfolio of just £200,000.

I think that target is achievable, even for newbie investors. Take someone who is 35 today, and plans to retire at 68. They still have 33 years to build the portfolio they need.

Tax-free inside a Stocks and Shares ISA

If they invested £200 a month in a Stocks and Shares ISA, and their investments grew by 7% a year, on average, they would have £305,421 by age 68. That’s enough to generate a decent passive income, entirely free of tax.

This highlights the importance of investing as early as possible. The first £1 invested is the most important, because it has longest to compound and grow. Naturally, there is no guarantee that my portfolio would grow at an average rate of 7% a year, although that is roughly what the FTSE 100 has delivered over the decades.

On the other hand, it could grow at an even faster rate, giving me an even larger pool of money to generate my passive income. Even if I don’t hit that target, I will still enjoy a more comfortable retirement then if I relied solely on the State Pension.

The post Here’s how much I’d need to invest to earn passive income of £1,000 a month appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Harvey Jones doesn't hold any of the shares mentioned in this article. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With signs that many people want to keep working from home and interest rates remaining at record lows, the UK housing market has exploded in 2021. From this, we might assume that the share prices of FTSE 100 housebuilders have been racing ahead in tandem. Sadly for holders, that’s not been the case.

Taylor Wimpey (LSE: TW) is a great example. Year-to-date, its stock has gone nowhere. That trend has continued today, despite the company issuing what I regard as an encouraging update on trading. Is this a great opportunity for me to snap up this cheap dividend stock? 

On target

Like top-tier rival Persimmon earlier this week, Taylor Wimpey said that it had seen robust demand from customers. A sales rate of 0.91 homes per outlet per week has been logged in the second half of its financial year so far. For the year-to-date, this rises to 0.95. 

Despite facing a “competitive” market, TW also added nearly 5,500 plots to its short-term landbank during H2, bringing the total to approximately 84,000. Supported by a £2.8bn order book, it continues to target 17,000 to 18,000 competitions per year (and operating margin of roughly 21%-22%) in the medium term.

Looking ahead, the UK’s third-largest housebuilder said that it was still on track to meet existing guidance. Perhaps most positively for holders, the FTSE 100 member said that the rise in house prices had fully offset the increased cost of building homes. Despite a shortage of materials and drivers across the industry, the company also expects the situation to “gradually improve” from here.

Unfortunately, this wasn’t enough to impress the market.

Should I buy this FTSE 100 dividend stock?

Taylor Wimpey shares currently change hands at just 9 times forecast earnings. That’s cheaper than the aforementioned Persimmon (11 times earnings) but roughly on par with fellow FTSE 100 member Barratt Developments. However, one might argue that Persimmon’s higher returns on capital justify this slight premium. 

When it comes to dividends, however, I think Taylor Wimpey might be the pick of the bunch. A forecast 5.4% yield is lower than peers but analysts believe this will be better covered by profits. For me, the latter really matters. In my book, it’s better to be confident of receiving a smaller (but still chunky) payout over one that may prove too ambitious.

Naturally, it would be a bad idea for me to become dependent on any company for its dividends. This is particularly the case for housebuilders. Market conditions, mortgage availability and government schemes are currently favourable. But how long will this be the case?

A threat to the dividend could be especially problematic for TW owners considering that capital gains haven’t been stellar. Right now, TW’s stock is only 8% higher in value compared to where it stood five years ago. Surprisingly, that’s less than the gain made by the FTSE 100 as a whole.

Stay diversified

Notwithstanding this, I think there’s quite a lot to like here. As long as I remain diversified and hold other FTSE 100 dividend stocks from different sectors, I’d be comfortable building a position from today. This is assuming that generating income from my portfolio was my only priority. If not, I can think of a number of stocks that may offer a more balanced combination of capital growth and cash returns.     

The post 5% dividend yield! Should I buy this cheap FTSE 100 income stock? appeared first on The Twelfth Magpie.

More reading

• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?
• This 7.7% yielding dividend stock trades at a 13-year low – time to consider buying?
• £10,000 in these 3 FTSE 250 stocks could generate £982 of passive income over the next 12 months!
• How much would you need in a Stocks and Shares ISA to earn £33,814 a year in dividend income?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

House prices are booming and so is the housebuilding sector. I think one of the best shares to buy in this sector is also the biggest, Barratt Developments (LSE: BDEV). Earlier this month it increased full-year expectations, as it completed more homes and sold them for higher prices. Today’s high demand looks set to continue, even after the stamp duty holiday expires.

My worry is that rising building costs will eat into profits as commodity prices spiral, while supply chain issues could slow completions. Unemployment could rise once furlough ends, making buyers feel poorer.

However, with the new-build market underpinned by the government-backed Help to Buy scheme, Barratt’s valuation of just 10.7 times forecast earnings and forward yield of 3.7% (covered 2.4 times) look tempting to me.

This also looks like one of the best shares to buy

Prudential (LSE: PRU) also merits a place on my list of best FTSE 100 shares to buy, in part due to its low valuation of just 12.6 times forward earnings. The insurer is now focusing on fast-growing Asian and African markets, offering a vast untapped market of the middle-classes look to build and protect their wealth. The opportunity is huge.

Share price growth has been strong lately with the stock up 43% in a year. There’s a danger it may idle after posting such quick-fire growth, despite that low valuation. Another potential concern is that Prudential’s negligible dividend leaves investors relying on growth. A planned $3bn equity raise aimed at reducing debt and funding opportunities could dilute the stock.

Despite this, sales are accelerating both in Asia and Africa as they emerge from the pandemic, so there’s a vast opportunity for investors willing to be patient.

FTSE 100 growth stock

I also rate quality assurance provider Intertek Group (LSE: ITRK) as one of the best shares to buy on today’s FTSE 100. Yesterday, it reported “solid” revenue growth of 2.7% year-to-date, speeding up in March and April when revenues jumped 9.3%. Sales are still below 2019 levels, but the group remains on track to hit this year’s targets. 

My concern is that the stock is expensive, trading at 30.9 times earnings. Recent growth has been good, but not that good. Especially since the yield is just 1.8%.

However, I think it’s a strong long-term opportunity as Intertek seeks new outsourcing opportunities in the $250bn global quality assurance market. It should also benefit from the global push to net zero carbon as companies battle to prove supply chains are clean.

I don’t expect instant success, but I never do when hunting down the best shares to buy. Instead, I prefer to focus on the long-term story and that remains promising. With all three stocks, I might wait to buy them on the dips.

The post Best shares to buy: I’d build my portfolio on these 3 FTSE 100 stocks appeared first on The Twelfth Magpie.

More reading

• This beaten-down FTSE 100 dividend share just jumped 11% in a week but still yields almost 5%
• Thinking about a SIPP for retirement? Here are 3 starter stocks to consider
• £1,000 buys 380 shares in this 5.4% yielding passive income stock
• Down 33% with a 5.6% dividend yield, is this FTSE 100 stock a once-in-a-decade buy?
• How much do you need in a Stocks and Shares ISA to generate £100 a day in passive income?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Intertek and Prudential. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Personally, I won’t be buying airlines such as easyJet or Ryanair. At some point both stocks could fly, and prove among the very best shares to buy for the recovery. But, as countries strengthen their travel bans, I don’t think we’re there yet.

Cineworld also worries me. The James Bond movie is postponed yet again, and streaming services are encroaching into its territory. The cinema chain has the liquidity to survive this year but I’d like to see signs of an economic recovery before taking a chance on it.

I reckon Bunzl is one of the best shares to buy

Distribution and outsourcing group Bunzl (LSE: BNZL) strikes me as one of the best FTSE 100 shares to buy for my portfolio now. It has risen steadily since last year’s crash, boosted by demand for its cleaning, hygiene, and healthcare offerings, including sanitisers, gloves, and face shields.

The pandemic will not last forever, so this trend will eventually reverse. Brokers at Barclays have also warned of a backlash against disposable packaging, and single-use plastics make up about 15% of Bunzl’s sales. However, I would expect management to adapt and keep up with its competitors, if not stay one step ahead.

I rate Bunzl as one of the best shares to buy because it offers my portfolio plenty of diversification, both by region and country. It looks pretty resilient, too, with strong cash flows and a robust balance sheet. The Bunzl share price may look pricey at 18.21 times earnings, but it yields a solid 2.09%. I’ll take that level of income these days.

I’d also target the Barratt share price

The UK property market is nothing if not resilient and I also favour housebuilder Barratt Developments. Management announced earlier this month that it planned to restart dividends after first-half forward sales jumped 14.3% to 13,588 homes. I’m a big fan of dividend stocks, and like to include some on my list of best shares to buy.

The stamp duty holiday was in full swing during this period, and this will have bolstered demand. House sales and price growth may now have peaked and could slow once the tax break ends on 31 March. However, demand for housing in the UK continues to outstrip demand, and today’s record low mortgage rates should underpin sales.

I’m hoping there is an opportunity here, with the Barratt share price trading at just 11.6 times earnings. I am tempted to add this stock to my portfolio today. I am viewing this as a long-term buy and hold investment, to give me more exposure to the housebuilding sector. At today’s valuation I see no point in waiting. Especially since sentiment could recover strongly once the dividend is restored.

I reckon these are two of the best shares to buy today, for my own portfolio, as they should slot in nicely alongside my existing holdings.

The post I reckon these 2 FTSE 100 stocks could be among the best shares to buy today appeared first on The Twelfth Magpie.

More reading

• Up 27.1% in 6 months: a FTSE 100 share paying out 2.8% a year!
• This beaten-down FTSE 100 dividend share just jumped 11% in a week but still yields almost 5%
• How do the government’s latest changes affect your Stocks and Shares ISA?
• £1,000 buys 380 shares in this 5.4% yielding passive income stock
• Down 33% with a 5.6% dividend yield, is this FTSE 100 stock a once-in-a-decade buy?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The big question is whether you are taking on an acceptable level of risk, given the potential returns. I believe FTSE 100-listed Barratt Developments (LSE: BDEV) is tempting at today’s low price despite housing market worries. Another dirt-cheap housebuilder, FTSE 250-listed Crest Nicholson Holdings (LSE: CRST), looks somewhat riskier.

Barratt and Crest Nicholson are both falling today, following new Bank of England figures showing mortgage approvals have tumbled to a fresh low.

Analysts expected around 25,000 mortgage approvals for house purchases in May. Instead, there were just 9,273. That is a dreadful figure, if you are in the business of building new homes. No wonder these housebuilders have dirt-cheap share prices today.

However, I do not think it reflects the long-term story. Ultimately, we live on a crowded island, and demand for property dramatically outweighs supply. The housing market was bound to struggle in the wake of the pandemic, and that is exactly what we are seeing today.

Dirt-cheap FTSE share opportunities

You still cannot rule out a house price crash as people lose their jobs when furlough ends. Almost two million have taken mortgage payment holidays, showing how many are in difficulty. You should only buy today if you plan to hold for the long term. Minimum five years. Ideally, 10 or longer.

The Barratt share price trades at just 6.81 times earnings, while Crest Nicholson is yours for a dirt-cheap valuation of 5.64 times earnings.

Of the two, I would favour FTSE 100 stalwart Barratt. Balance sheet strength is vital, and the £5bn group boasts around £430m in cash. It can also call on £700m worth of undrawn credit. That should keep operations ticking over until people start buying houses in greater numbers.

Crest Nicholson should also have the liquidity to survive challenging market conditions. This includes a £250m revolving credit facility expiring June 2024, £100m of senior loan notes, and a further £300m through the CCFF commercial paper programme, undrawn at present.

Investors are wary, though. Over the last month, Crest Nicholson is down 18%, while the Barratt share price has held steady.

Always understand the risks

Last week, Crest Nicholson reported that revenues slid 52.2% to £240m, in the six months to 30 April. Adjusted pre-tax profit fell 93% to £4.5m. Home completions fell by a third and the average open market selling price was down 16.7% to £344,000.

Barratt and Crest Nicholson both dropped their dividends in March, to preserve cash and protect balance sheets. That also explains why they are dirt-cheap FTSE bargains.

I think this is a good time for brave investors to take a few risks, provided they plan to buy and hold for the long-term. I’m talking five years or longer. On those terms, Barrett offers an acceptable level of risk. Crest Nicholson looks a bit more edgy, but some of you might think it is a risk worth taking.

The post Stock market crash bargain alert! I’d buy these dirt-cheap FTSE 100 shares ahead of the recovery appeared first on The Twelfth Magpie.

More reading

• This beaten-down FTSE 100 dividend share just jumped 11% in a week but still yields almost 5%
• £1,000 buys 380 shares in this 5.4% yielding passive income stock
• Down 33% with a 5.6% dividend yield, is this FTSE 100 stock a once-in-a-decade buy?
• Why are these FTSE 100 growth and dividend stocks so cheap?
• Down 65% but yielding 6.7% – is this beaten-down UK stock now a generational bargain?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The housing market is on the front line of the economy. With the UK heading into recession due to Covid-19, the big builders face fewer sales at lower prices. 

Despite this, I’m a fan of the housebuilding sector. Britons love bricks & mortar and are hungry to buy when they can afford it. Demand has outstripped supply for years. Land is limited, but the population isn’t, and that looks set to continue. Dividends have been generous (until lately).

Take your opportunities

The sharp drop in the Barratt share price looks like a buying opportunity to me, if you plan to hold for the long term. Its stock is down more than 40% from its January peaks, despite climbing 10% in the last month.

This means those who buy Barratt stock today are getting in at a relatively low valuation. If you’re looking to build a million-pound portfolio for your retirement, then it pays to buy bargain stocks when you can.

I don’t expect the housing market to race away. Especially if we get a second wave of the pandemic and have to go back into lockdown. However, I’m encouraged to see the government opening up the sector again.

The Barratt share price picked up last week, as it began a phased return to housebuilding on 11 May at roughly half of its locations. From Thursday, it will open a limited number of sales offices to customers, on an appointment basis.

Inevitably, potential buyers will be wary. Many will be pushing for discounts, having seen alarmist headlines suggesting house prices could fall 20% this year. Others will have lost their jobs and be in no position to buy.

Whether you think the Barratt share price is a ‘buy’ today will partly depend on how you view the recovery from here. It is clearly going to be bumpy. But that’s why you’re able to buy the UK’s biggest housebuilder at a knock-down price.

I’d buy the Barratt share price today

Barratt doesn’t pay a dividend right now. Nor is there financial guidance to rely on, as management pulled that too. The Barratt balance sheet is relatively healthy though, with £426.7m of net cash at the end of 2019. Covid-19 will eat into that, but it started in a strong position.

Britain needs housebuilders. If you plan to hold for the long term, the Barratt share price looks like a buy to me. It could be another building block in your aim to make a million and retire in comfort.

The post The Barratt share price is down 40%! I’d buy it to build a million-pound portfolio appeared first on The Twelfth Magpie.

More reading

• This beaten-down FTSE 100 dividend share just jumped 11% in a week but still yields almost 5%
• £1,000 buys 380 shares in this 5.4% yielding passive income stock
• Down 33% with a 5.6% dividend yield, is this FTSE 100 stock a once-in-a-decade buy?
• Why are these FTSE 100 growth and dividend stocks so cheap?
• Down 65% but yielding 6.7% – is this beaten-down UK stock now a generational bargain?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Barratt share price is down almost half from its January peak, while the Persimmon share price has fallen almost as far. However, during this week’s tentative rally, the two stocks leapt around 35% in a few days. This suggests these FTSE 100 big guns could be a great way to play the stock market recovery, once the worst  is over.

We aren’t there yet. Both stocks have fallen around 7% this morning as the crash resumes, faster than most on the FTSE 100. However, once the Covid-19 threat recedes and the stock market crash bottoms out, you may be glad you bought them.

Barrett share price plunge

Housebuilders generally are having a tough time right now, with Redrow, Berkeley Group and Crest Nicholson cancelling or scaling back dividends in recent days.

On Wednesday, Barratt cancelled its dividend, saving £100m, and suspended all financial guidance. It also shut down construction sites, sales centres, and offices. It has halted land buying, recruitment and non-essential capital expenditure. But it’s continuing to pay suppliers and sub-contractors. It may restart dividend payments when publishing full-year results in September.

Persimmon share price pain

Persimmon has also cancelled its dividend, while embarking on the orderly shutdown of construction and sale sites. Clearly, this is going to hurt. If they aren’t selling houses, they won’t generate any revenues, but still have costs.

FTSE 100 housebuilders are in a much stronger position than during the 2008 stock market crash. Barratt assures investors it’s in a “position of strength, with a robust balance sheet, a highly skilled workforce and an experienced board.” Meanwhile, Persimmon said its “long-term strategy of minimising financial risk and maintaining capital discipline” leaves it well placed.

In October, Barrett reported £200m of net debt, offset by £958.3m in cash, giving it net cash of £758.3m. Persimmon has no debt on its balance sheet. This has allowed both to pay such generous dividends, with the two stocks yielding 6.56% and 12.28%, before this week’s cancellations.

Stock market recovery in sight?

The unknowable questions are when will the stock market crash bottom out? And how much long-term damage will it leave behind? Housebuyers may be too shaken to meet today’s inflated prices, even if their income has held up, although near-zero base rates will help.

But the UK housing market is resilient and underpinned by an excess of demand over supply. The Barratt share price trades at 6.53 times earnings, while the Persimmon share price is yours at 7.79 times, so current fears are reflected in their share prices.

The stock market recovery could take time, but Barratt and Persimmon should be at the forefront when it finally does come.

The post I reckon these 2 FTSE 100 bargains could spearhead the stock market recovery appeared first on The Twelfth Magpie.

More reading

• Down 63% and yielding 6.3%! Is this FTSE 100 share a brilliant bargain?
• This beaten-down FTSE 100 dividend share just jumped 11% in a week but still yields almost 5%
• This 5.5%-yielding income stock’s at a 13-year low and cheap to-boot! Time to consider buying?
• Down 65% but yielding 6%! Is this FTSE 100 dividend stock an unmissable bargain?
• A 6.7% forecast yield and 53% below ‘fair value’! 1 stunning FTSE income stock for investors to consider today?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The gold price recently hit a seven-year high of $1,700 an ounce, but has fallen since then. The precious metal always shoots up in times of trouble, but can fall back just as quickly, once the immediate danger passes. If markets feel confident that the coronavirus has been contained, the gold price could swiftly fall even further.

Personally, I wouldn’t hold more than 5% of my portfolio in gold, which pays zero interest or dividends, with price growth entirely dependent on investor sentiment.

Balfour Beatty

I would invest most of my money in a balanced portfolio of top UK companies, using the tax-efficient Stocks and Shares ISA allowance. Right now, I am tempted by the Balfour Beatty (LSE: BBY) share price, which is up a massive 16% today after it reported an 8% increase in group underlying profit from operations to £221m in its full-year results.

The FTSE 250 construction group also reported a 52% increase in year-end net cash to £512m, a 13% increase in its order book to £14.3bn. It is still in recovery mode after issuing a series of profit warnings, and surviving a takeover bid by Carillion in 2014, which was a lucky escape.

Management has been working on cutting costs and narrowing its focus on profitable, workable projects, mostly in the UK and US. Today, it rewarded loyal investors by hiking its dividend 33% to 6.4p

Group CEO Leo Quinn hailed its efforts in creating a scalable business with an increasing order book, that should drive “profitable managed growth and cash generation on a sustainable basis”. The group is paying down around £150m of borrowings in 2020. Balfour Beatty should also profit from HS2.

The share price is stabilised but you can still buy it at just 9.1 times forward earnings, and get a forecast yield of 3.4%, nicely covered 3.2 times by earnings. These could be bumpy times for the economy and construction, depending on how the coronavirus pans out, but if you are brave and optimistic, Balfour Beatty could offer long-term capital growth along with a rising dividend income stream.

Barratt Developments

Or you might prefer to invest in the Barratt Developments (LSE: BDEV) share price instead. This was rising steadily until the recent market panic, but today’s move to slash interest rates could give it a lift by making mortgage borrowing cheaper, and easing the pressure on household finances, to keep the housing market buoyant.

Last month, Britain’s biggest housebuilder reported the highest half-year home completions in 12 years, up 9.1% to 8,314 in total, while revenues rose 6.3% to £2.67bn, and profit before tax climbed 3.7% to £423m.

The £6.9bn group trades at just 9.8 times forward earnings and offers a hugely generous forecast yield of 6.4%, covered 1.6 times by earnings. Despite a post-Brexit referendum dip, the Barratt share price has grown steadily for a decade, and falling interest rates should help it through today’s worries. I would buy it ahead of gold.

The post Gold doesn’t pay interest! I’d buy these 2 FTSE 350 dividend stocks for a rising income appeared first on The Twelfth Magpie.

More reading

• This beaten-down FTSE 100 dividend share just jumped 11% in a week but still yields almost 5%
• Looking for stocks to buy? Here are 3 that could benefit after Keir Starmer’s resignation
• £1,000 buys 380 shares in this 5.4% yielding passive income stock
• Down 33% with a 5.6% dividend yield, is this FTSE 100 stock a once-in-a-decade buy?
• Why are these FTSE 100 growth and dividend stocks so cheap?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Double-digit spike

The FTSE 100 is up 1.67% at time of writing, but some stocks on the index are doing dramatically better, notably in the housebuilding sector.

At time of writing, the UK’s largest housebuilder Barratt Developments (LSE: BDEV) is up 11.7%, while Taylor Wimpey (LSE: TW) has jumped a stonking 14.22%. These aren’t the only two flying today, with Persimmon up 11.26% and Bovis Homes Group up 8.26%.

None have come out with any news, updates or reports, it is all down to the election victory.

Housebuilders are influenced by political events more than almost any other major investment sector. Remember how they collapsed after the shock Brexit result in 2016? They took a real hammering as investors fled in fear of what might happen following the vote.

The assumption then was that Brexit would hit the UK economy hard, and domestic-focused stocks would be hit hardest of all. Other major FTSE 100 stocks have a lot more ballast, given that Britain’s blue-chips generate three-quarters of their earnings overseas. They benefited from the post-referendum slump in the pound, as those earnings were worth much more once converted back into sterling.

The housebuilders had no such protection. They build nearly all their homes in the UK.

Uncertain times lie ahead

Yet it is ironic that they are rising so strongly today, given that Britain is now on a fast track to leave the EU, and we still don’t know what will happen to the economy when we actually do exit. But at least investors have greater certainty over the direction of travel.

I have been a big supporter of Barratt and Taylor Wimpey as an investment for some time. I always felt they were hit unfairly hard by the post-referendum collapse, which left them trading at lowly valuations while offering massive dividends.

In September, I said Barratt was a real bargain, trading at 8.8 times forward earnings, despite posting a 9% increase in full-year profits before tax to £909.8m. The Barratt share price still looks a bargain today, trading at 9.2 times earnings, while the dividend yield is still solid at 6.9%, covered 1.6 times by earnings. Operating margins are 19.1%.

These are massive yields

Similarly, in October I noted that Taylor Wimpey was paying the second-highest yield on the FTSE 100, a forecast 11.9%. I predicted that it would swing back into favour as no-deal prospects diminished. At the time, it had just reported a marginal dip in first-half profits before tax from £301m to £299.8m, while boasting net cash of £392m.

I think the Taylor Wimpey share price is still a buy today, trading at 8.7 times forward earnings and yielding a forecast 10.4%, albeit with narrow cover of 1.1.

I always resist jumping in after a massive spike like this one, because profit-takers quickly emerge, and the price is likely to retreat in the hours ahead, when everybody calms down.

I see both as a buy, though. I have backed the housebuilders for a long time, I’m not stopping now.

The post I’d buy these 2 FTSE 100 dividend heroes after Boris Johnson’s landslide win appeared first on The Twelfth Magpie.

More reading

• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?
• This beaten-down FTSE 100 dividend share just jumped 11% in a week but still yields almost 5%
• £1,000 buys 380 shares in this 5.4% yielding passive income stock
• This 7.7% yielding dividend stock trades at a 13-year low – time to consider buying?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.