Standing tall

As mortgage rates continue to rise as a result of interest rate hikes, demand for homes has cooled. This can be seen in Rightmove‘s June house price index, which shows that house price growth is slowing. As such, analysts are actually expecting prices to drop, hence the overall weakness among the FTSE 100 housebuilder stocks.

Nonetheless, Berkeley stands out as doing better than its Footsie peers year-to-date (YTD). The shares’ performance becomes even more puzzling when I consider that it’s the only developer not paying a dividend. So, what’s behind the stock’s relative strength (bearing in mind that it’s still down this year)?

Berkeley loves the south

Upon analysing the number of houses built, Berkeley’s more solid stock performance gets even more confusing. The Croydon-based developer doesn’t even rank within the top five builders in Britain for house completions.

However, there’s a metric in which Berkeley excels in — average selling price. Due to the housebuilder’s speciality in building posher, London properties, its average house price is two to three times higher than its competitors.

As a ‘luxury’ builder, Berkeley has been able to pass on most of its higher costs to its customers without impacting demand. This was evident in its FY22 results with management citing resilient demand for its properties.

Moreover, Berkeley’s exposure to London and the South East has allowed it to benefit from higher house prices, with the average house price in the capital costing £530,000. This is almost double of the UK average. More importantly, the lack of supply in these regions will most probably protect Berkeley’s top line from declining house prices.

Built like bricks

Aside from its solid stock performance, Berkeley also boasts a solid balance sheet. Although its debt-to-equity ratio of 21% is slightly higher than that of its FTSE 100 peers, its cash position covers its debt comfortably. Additionally, it’s got the second highest profit margin in the industry, at 20.5%, which is also higher than the industry’s average.

Having said that, it mentioned free cash flow of -£131m in its latest results. This would normally alarm me, but this was down to the company’s recent acquisition of St. William. This free cash flow impact should be a one-off and the board expects positive cash flow ahead. The company sold 42% more homes last year after all, and has an order backlog worth £2.2bn, which is an increase from £1.7bn a year ago.

I think Berkeley could be a lucrative housebuilder for me to invest in, if not for one thing. A great deal of uncertainty lies ahead for the housing market, with a potential recession on the cards, the company may be vulnerable, even with its London exposure. For that reason, I’m not ready to buy Berkeley shares at the moment. Instead, I’ll be scouting for potential winners in the event of a stock market crash.

The post Is this FTSE 100 stock the best housebuilder to invest in? appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended Redrow. 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.

Lloyds

Lloyds (LSE: LLOY) is one of Britain’s biggest financial institutions. It earns the bulk of its revenue from mortgage loans. This week, a large number of director dealings occurred with Lloyds shares going both ways.

• Name: Charlie Nunn
• Position of director: Chief Executive Officer
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount purchased: 312,313 @ £0.43
• Total value: £135,843.66

• Name: William Chalmers
• Position of director: Chief Financial Officer
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount purchased: 149,910 @ £0.43
• Total value: £65,204.85

• Name: Antonio Lorenzo
• Position of director: Chief Executive Officer (Scottish Widows)
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount purchased: 148,661 @ £0.43
• Total value: £64,661.59

• Name: Antonio Lorenzo
• Position of director: Chief Executive Officer (Scottish Widows)
• Nature of transaction: Disposal of shares
• Date of transaction: 22 June 2022
• Amount sold: 150,000 @ £0.44
• Total value: £65,457.30

• Name: Vim Maru
• Position of director: Retail Group Director
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount purchased: 148,661 @ £0.43
• Total value: £64,661.59

• Name: David Oldfield
• Position of director: Commercial Banking Group Director
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount purchased: 145,746 @ £0.43
• Total value: £63,393.68

• Name: Janet Pope
• Position of director: Chief of Staff and Sustainable Business Group Director
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount purchased: 104,104 @ £0.43
• Total value: £45,281.08

• Name: Stephen Shelley
• Position of director: Chief Risk Officer
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount purchased: 147,828 @ £0.43
• Total value: £64,299.27

• Name: Andrew Walton
• Position of director: Group Corporate Affairs Director
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount purchased: 104,104 @ £0.43
• Total value: £45,281.08

Taylor Wimpey

Taylor Wimpey (LSE: TW) is one of the UK’s biggest residential developers. Both the Taylor Wimpey CEO and Chairman bought a large sum of Taylor Wimpey shares this week. This course of action hopes to shore up investor sentiment amid slowing house price growth.

• Name: Irene Dorner
• Position of director: Chairman
• Nature of transaction: Purchase of shares
• Date of transaction: 22 June 2022
• Amount purchased: 21,750 @ £1.15
• Total value: £25,016.20

• Name: Jennie Daly
• Position of director: Chief Executive Officer
• Nature of transaction: Purchase of shares
• Date of transaction: 22 June 2022
• Amount purchased: 21,509 @ £1.15
• Total value: £24,812.57

Berkeley

Berkeley (LSE: BKG)  is another one of Britain’s biggest housebuilders. The FTSE 100 firm reported a decent set of results this week. However, this wasn’t enough, as the Berkeley share price slid downwards. Nonetheless, a large set of director dealings and institutional buying amounted to millions of pounds in Berkeley shares. This should boost investor sentiment in the long-term, despite slowing house price growth.

• Name: William and Jane Jackson
• Position of director: Non-Executive Director and Person Closely Associated to Non-Executive Director
• Nature of transaction: Purchase of shares
• Date of transaction: 22 June 2022
• Amount purchased: 16,148 @ £36.57
• Total value: £590,566.42

• Name: Robert Perrins and Vanessa Perrins as Trustees of the Robert Perrins Discretionary Settlement
• Position of director: Person(s) Closely Associated to Rob Perrins (Berkeley Chief Executive Officer)
• Nature of transaction: Purchase of shares
• Date of transaction: 22 June 2022
• Amount purchased: 50,000 @ £36.57
• Total value: £1,847,644.75

• Name: Michael Dobson
• Position of director: Non-Executive Director
• Nature of transaction: Purchase of shares
• Date of transaction: 22 June 2022
• Amount purchased: 4,000 @ £36.17
• Total value: £144,686.56

• Name: Julia Barker
• Position of director: Person Closely Associated with Glyn Barker (Berkeley Chairman)
• Nature of transaction: Purchase of shares
• Date of transaction: 22 June 2022
• Amount purchased: 1,950 @ £37.27
• Total value: £72,669.37

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this instance, most of the director dealings at Lloyds occurred with free shares. These shares were acquired by directors under the Lloyds fixed share award scheme. Share award schemes give employees actual shares rather than share options. The value of shares given to directors here are treated as employment income. This means that they may be subject to tax and national insurance contributions. That is unless they opt for an HMRC-approved share scheme, which has its own rules and requirements.

The post Director dealings: Lloyds, Taylor Wimpey, Berkeley appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended Lloyds Banking Group. 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.

Berkeley (FY22 earnings)

Berkeley (LSE: BKG) is a British property developer and housebuilder. It mainly builds homes and neighbourhoods across London, Birmingham, and the South of England. The company is expected to release its FY22 earnings results for the year ending April 2022 on Wednesday 22 June.

The FTSE earnings preview indicates slight growth, as the housebuilder is expected to have capitalised on higher house prices. Nonetheless, analysts are predicting that if the outlook for FY23 comes in below consensus expectations, Berkeley shares may be in for a tough time.

DS Smith (FY22 earnings)

DS Smith (LSE: SMDS) is a British multinational packaging business. It offers sustainable, plastic-free packaging, integrated recycling services, and sustainable paper products. The firm is expecting to report earnings for the year ending April 2022 on Wednesday 21 June.

Analysts at Jefferies Financial Group recently reduced their EPS estimates for DS Smith. Morgan Stanley, Credit Suisse, and JP Morgan all reduced their price targets as well. So, if DS Smith can beat its earnings estimates and provide a positive outlook, its share price could recover. Otherwise, a further drop in its stock is to be expected.

Safestore (H1 22 update)

Safestore (LSE: SAFE) is the UK’s largest and Europe’s second-largest provider of self-storage. It has over 120 locations in the UK. The FTSE 250 firm is forecasted to report its earnings results for the six-month period ending April 2022, on Tuesday 21 June.

However, Safestore’s first-half earnings results are yet to be officially announced on its earnings calendar. Nonetheless, these are the figures to look out for. Analysts in the UK don’t normally publish earnings previews for six-month periods, so it’s best to compare the firm’s upcoming 2022 first-half numbers to the ones from a year before. The H1 22 figures can also be useful to determine whether it’ll outperform its FY21 numbers, or even beat analysts’ FY22 forecasts.

The post FTSE earnings preview: Berkeley, DS Smith, Safestore appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned at the time of writing. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool UK has recommended DS Smith. 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.

As such, investing in FTSE 100 dividend shares at a time when the index itself has a dividend yield of around 4.5% could be a shrewd move. With that in mind, here are two FTSE 100 dividend stocks that could offer an impressive income return over the long run.

Berkeley Group

While the housebuilding sector has experienced a difficult period since the EU referendum, Berkeley Group (LSE: BKG) continues to offer an appealing long-term income investing outlook. The company has a dominant position in the prime housebuilding sector, while its strategy of expanding into new regions of the UK could provide greater diversification and higher returns.

Berkeley Group’s dividend yield depends on whether it uses excess capital that has been earmarked for shareholder payouts on dividends or share buybacks. Either way, the company offers a generous income investing outlook, with it now expected to return £280m to shareholders per year until 2025. This could mean that it yields as much as 6% per year over the next five-plus years.

With Berkeley Group having a net cash position of £850m and demand for prime properties likely to remain buoyant over the long run, it could offer an improving income investing outlook. Trading on a price-to-earnings (P/E) ratio of 11, it also seems to offer good value for money and may be able to deliver impressive capital growth.

Smiths Group

With the prospects for the global economy being highly uncertain at the present time, the diversity offered by Smiths Group (LSE: SMIN) could be highly attractive to many investors. The company has a diverse range of businesses, with it operating in areas such as security services, oil and gas support services and technology.

In the current year, the company is forecast to post a rise in earnings of 12%. This puts it on a price-to-earnings growth (PEG) ratio of just 1.4, which indicates that it could offer good value for money at the present time.

In terms of its income prospects, Smiths Group’s dividend yield of 3.2% may not be among the highest in the FTSE 100. However, its scope to raise dividends at a rapid rate could be high. Shareholder payouts are covered 2.1 times by profit, which suggests that they could rise at a faster pace than earnings, without putting the company’s financial standing under pressure.

With a diverse business model that has a bright future outlook, the risks of investing in the business may be lower than for some of its FTSE 100 peers. As such, now could be the right time to buy a slice of the company.

The post Forget a Cash ISA! I’d buy and hold these 2 FTSE 100 dividend shares today appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Berkeley Group Holdings. 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.

That’s put pressure on buy-to-let landlords’ profits, which rely on capital gains from property sales and rental income that’s high enough to cover ownership costs.

Falling returns

Rental yields in London now average just 5.4%, according to Hamptons. In the North East, where yields are highest, the figure is 8.7%.

Those numbers may seem attractive. But rental yield — which compares rent to a property’s purchase price — is calculated before costs such as maintenance, insurance, mortgage interest and void periods. Most landlords’ net yield, after costs and tax, will be much lower.

By contrast, a number of good quality FTSE 100 property stocks offer comparable dividend yields that can be received tax-free and with no costs if the shares are held in a stocks and shares ISA. This is where I’d put my money today.

Owning a slice of London

Rather than paying peak prices for houses, I think it makes more sense to buy property when it’s out of favour and prices have fallen. That’s certainly the case at FTSE 100 retail and office landlord Landsec (LSE: LAND), which released full-year results today.

The value of Landsec’s portfolio fell by 4.1% to £13,750m last year. This was mainly driven by an 11.7% fall in the value of the group’s £2,493m portfolio of shopping centres, which includes part ownership of Bluewater in Kent.

However, the value of Landsec’s £5,266m portfolio of London offices was almost unchanged, while leisure and hotel properties also held up well.

Retail property may have further to fall. But investors buying Landsec shares don’t have to pay the asking price. At about 890p, the stock trades at a discount of more than 30% to its net asset value of 1,339p per share. That looks like a comfortable margin of safety to me.

Landsec plans to focus on the London market for future developments. Over the long term, I expect this to be a profitable strategy. In the meantime, the shares offer a cash dividend yield of 5.1%. In my view, this is a stock to buy and tuck away for income.

Another way to play London housing

I’m staying with London for my second pick today. Berkeley Group Holdings (LSE: BKG) is a well-known housebuilder that’s chaired by founder Tony Pidgley.

Mr Pidgley has an enviable record of timing the market well and spotting cycles early. Berkeley called the top in London property some time ago and is now starting to invest in “the next wave of regeneration sites”.

Profits are expected to fall in 2019/20. But the firm’s clear guidance on profits means that this news should already be factored into the share price.

The group reported net cash of £859.7m at the end of October and expects to return £280m to shareholders each year until 2025. That’s about 217p per share. Some of this is expected to be used for share buybacks, with the rest spent on dividends.

Analysts expect Berkeley to pay a dividend of 203p per share for the current year, giving a forecast yield of 5.5%. For investors with a long-term view, I’d rate Berkeley as a good way to profit from London housing.

The post Buy-to-let is dying. I’d buy these FTSE 100 property stocks appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Landsec. 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 that in mind, here are two FTSE 100 dividend shares that could be worth buying today and holding over the long-term.

Micro Focus

It’s been a rollercoaster ride for investors in Micro Focus (LSE: MCRO) over the last few years. The company experienced financial difficulties, as well as a change in management team, but now seems to be making encouraging progress in delivering on its revised strategy.

In the current year it is forecast to post a rise in earnings of around 5%. While not the highest growth rate in the FTSE 100, it represents a marked improvement from its recent financial performance. It means that its dividend may be becoming increasingly sustainable, with it currently covered 1.9 times by profit.

Since Micro Focus has a dividend yield of around 4%, it could deliver an impressive income return. Although its shares have become increasingly popular among investors this year, having risen 38% in 2019, it still trades on a price-to-earnings (P/E) ratio of 12.8. This suggests that alongside its income prospects, it could also offer capital growth potential as a result of an upward re-rating as its bottom-line growth improves.

Berkeley Group

The London property market’s performance in the last couple of years has provided a headwind for prime property developer Berkeley Group (LSE: BKG). As a result, its bottom line is expected to fall in the current year and next year, with this seeming to have impacted investor sentiment towards the company. In fact, its shares have fallen by 7% in the last year.

In the long run, the housebuilder seems to have a solid position within what could prove to be a strong growth market. The London property market has always moved in cycles, and there could be buying opportunities while it trades at a low ebb. Since Berkeley’s shares currently have a P/E ratio of 11.7 using next year’s earnings figure, they appear to offer good value for money relative to the wider FTSE 100.

Berkeley has a generous dividend outlook, with its return of capital expected to continue as per its long-term strategy. This means that it could have an annual dividend yield of as much as 5.3%, depending on whether it uses excess capital for dividends or share buybacks.

Therefore, while a relatively unpopular share that could struggle in the short run as the London property market experiences lower demand, it could offer long-term income and value investing potential. As such, now could be the right time to buy a slice of it.

The post 2 cheap FTSE 100 dividend stocks I’d buy and hold forever appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Berkeley Group Holdings and Micro Focus. The Motley Fool UK has recommended Micro Focus. 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.

I love their low valuations which (in my opinion, at least) more than reflect the slim chances of a sharp fall in property prices. I also like their chunky dividends, which make them some of the biggest yielders on the blue-chip index right now. It’s why I count Taylor Wimpey and Barratt Developments amongst two of my favourite investments right now.

Now The Berkeley Group (LSE: BKG) is a builder that shares all of these characteristics, yet I can understand why this Footsie firm may not be to the liking of all investors. Its new-builds can be found predominantly in London and the South East, regions where house prices have stagnated (or even dropped) in response to the ongoing Brexit saga.

According to Hometrack’s latest UK Cities House Price Index report, property prices in London edged just 0.2% higher year-on-year in January. This compared with house price inflation of 2.9% across all 20 cities on the list.

More specifically, Hometrack cited Aberdeen and Inner London as the weakest housing markets with the longest sales periods and the biggest discounts. In these regions discounts to the asking price average 7%, it said, while the selling time stands at a chubby 16 weeks.

Better news!

Latest trading details released by Berkeley have somewhat exploded the belief that exposure to the capital’s property market should be avoided at all costs.

In a reassuring update late last week it said that “the trading environment… remains consistent with that experienced over the last two years,” soothing fears that homebuyer demand in London was falling through the floor. On top of this, Berkeley said that its updated pre-tax profit guidance for this year, and the next two years, was improved to the tune of 8%. In December the firm said that it was increasing its estimates for the current fiscal period “by at least 5%.”

No-one disputes that the next couple of years won’t throw up some difficulties for the building ace.  This is underlined by City predictions that Berkeley will suffer earnings dips through the next couple of years at least.

Still, given its proven resilience in challenging conditions, I reckon that the builder is worth serious attention at current prices. It trades on a very-attractive forward P/E ratio of 12.3 times, and given that the outlook for the London homes market remains strong in the decades ahead, this represents a great time for long-term investors to grab a slice of the action.

One final thing: at this very moment Berkeley carries a market-bashing prospective dividend yield of 5.1%. Clearly the business isn’t without its risks, but I believe its low valuation and giant dividend make it a great share to consider buying today.

The post Ignore the haters! I think this undervalued, 5%-yielding FTSE 100 dividend stock is a brilliant buy appeared first on The Twelfth Magpie.

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Royston Wild owns shares of Barratt Developments and Taylor Wimpey. 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.

Investors seem to be concerned about the bank’s future prospects. However, it appears to offer improving profit growth forecasts, with its valuation now seemingly attractive. With dividend growth potential, it could generate improving total returns in the long run.

As such, it could be worth buying alongside another FTSE 100 company that released an encouraging trading update on Friday.

Low valuation

The stock in question is prime housebuilder Berkeley Group (LSE: BKG). Its performance between 1 November 2018 and 28 February 2019 has been encouraging, despite continued challenging trading conditions. It has been able to invest in its brand during the period, as it seeks to deliver on its long-term development sites.

It anticipates having a net cash position as at 30 April that is around the same level as it was at its half-year results. It continues to offer a generous shareholder returns policy, with share buybacks being undertaken and the company expected to yield over 5% in the current financial year.

With Berkeley Group trading on a price-to-earnings (P/E) ratio of around 10.4, it seems to offer good value for money at the present time. While trading conditions may remain challenging as the Brexit process could now be extended, from a long-term perspective the stock appears to offer a strong position within what may prove to be a resilient growth market. As such, now could be the right time to buy it.

High return prospects

With the Barclays share price having declined heavily in the last year, the stock now appears to offer good value for money. It trades on a P/E ratio of just 7.2, which suggests that it has a wide margin of safety.

Clearly, investors are unsure about the future growth potential offered by the bank. While global economic risks remain in play, as well as potential disruption from Brexit, the company is expected to post a rise in net profit of 13% in the current year. This suggests that the changes which have been made under its new CEO are having a positive impact on its financial outlook, with there being the potential for further growth in the coming years.

With improving profit potential, Barclays is expected to deliver a rising dividend. It is due to yield 4.8% in the current year, while dividend cover of 2.9 times indicates that it can afford to pay out a higher portion of profit as a dividend. This puts the company in a strong position from an income perspective, and it could mean that the bank gradually becomes an increasingly appealing dividend share. Combined with its growth and value investing potential, this means that now could be the right time to buy it.

The post FTSE 100-member Barclays is down 20% in 1 year. Here’s what I’d do now appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Barclays and Berkeley Group Holdings. The Motley Fool UK has recommended Barclays. 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.

Highlighting the jitters surrounding this issue, FTSE 250 business Redrow recently claimed that “clarity over Brexit and the future of Help to Buy would improve market sentiment.”

Whilst some government direction on the future of the initiative would be welcome, of course I think that predictions over a possible termination of the programme seem a bit far-fetched. Just last year the government announced it was ploughing an additional £10bn into Help To Buy, underlining its commitment to the scheme. And despite claims that Help To Buy has had a significant effect in inflating property prices in the UK, data actually shows that that less than 5% of all home sales in the UK involve the use of the scheme.

In fact, reinforcing suggestions that Help To Buy has had a favourable effect on the housing market, the Home Builders Foundation (HBF) recently estimated that some 170,000 properties have been sold with use of the programme, more than four out of five of which have been snapped up by first-time buyers.

What’s more, the trade body has suggested that the median household income for those using the scheme stands at around £49,000, shooting down claims that the programme is being widely taken advantage of by wealthier buyers that the programme was of course not designed for.

Cheap AND cheerful

Stewart Baseley, executive chairman of the HBF, has recently described Help To Buy “an unmitigated success [that] has delivered handsomely on all its objectives,” and also commented that “it has enabled hundreds of thousands of people to realise their dream of owning a home, the vast majority of whom are first time buyers on average incomes.”

Any government action that would see the number of new homeowners getting onto the ladder fall would be politically disastrous for any government, which is why I think the termination of Help To Buy, or even a significant alteration to the terms of the programme, after the current scheme expiry date of March 2021 is pretty unlikely.

What’s more, HBF head Baseley has said that the programme “has led to an unprecedented increase in house-building activity, created tens of thousands of jobs and boosted local economies the length and breadth of the country.”

Without the financial boost that the scheme has provided to the home-builders, the increases in housing supply that Britain so desperately needs could slow to a crawl. And no politician would want this to occur on their watch, needless to say.

At current prices the FTSE 100 house-builders can be picked up for next to nothing. Barratt Developments and Taylor Wimpey both carry a forward P/E ratio of 8.1 times; The Berkeley Group 9.5 times; and Persimmon just 8.6 times.  Sure these businesses aren’t without their share of risk, as I have explained, but in my opinion these low multiples suggest that investor fears over these issues are overblown. Those wishing to pick up a beautiful bargain might want to think about buying into these businesses today.

The post Are the FTSE 100 house-builders the investment opportunities of a lifetime? appeared first on The Twelfth Magpie.

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• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Royston Wild owns shares in Barratt Developments and Taylor Wimpey. 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 sector is generally out of favour with the market at the moment. But a closer look suggests to me that there may be buying opportunities among these unloved stocks. I believe the two companies I’m examining today both have the potential to deliver market-beating returns.

2 years’ dividends in cash

My first company is a FTSE 100 firm which recently reported a £687m net cash balance — that’s enough to cover forecast dividends and share buybacks for the next two years.

Berkeley Group Holdings (LSE: BKG) is focused on upmarket homes in London and the South East. Chairman and founder Tony Pidgley is one of the most highly-respected operators in the property market.

Mr Pidgley’s decision to purchase large amounts of cheap land during the financial crisis has led to several years of bumper profits for the firm. The strong financial management which made these purchases possible has allowed the company to run without debt and provide generous cash returns for shareholders.

Time to buy again?

The problem is that Berkeley’s hoard of cheap land is running low. Recently purchased land has cost more and the market for London property has slowed somewhat. Because of this, the company expects profits “to return to more normal levels from 2018/19”. Management guidance is for profits to fall by about 30% this year.

The good news is that the group’s profit margins should remain attractive. Mr Pidgley is targeting a “pre-tax return on equity of 20% over the cycle”. I estimate that next year’s sales are likely to generate an operating profit margin of more than 20%.

Cash pile

Looking ahead, Berkeley expects to return £840m to shareholders over the three years to September 2021. The company ended last year with cash due from forward sales of £2.2bn and a net cash balance of £687m. Even without the forward sales, the firm’s existing cash is enough to cover two-thirds of planned shareholder returns, which equates to around 209p per share each year.

Some of this cash may be returned through share buybacks instead of dividends, but analysts’ forecasts suggest the majority will be paid out as cash, giving the stock a forward yield of about 5.5%.

At this level I think the shares could be worth considering for income, or perhaps to top up a long-term position.

One big risk

In my view, the big risk with Berkeley Group is that its profits are forecast to fall this year, and again in 2019/20. During that period we could see Brexit, a general election and rising interest rates. Conditions in the housing market could change dramatically.

I’m concerned about the risk of investing in a company with falling profits. After such a long housing boom, it could be several years before profits start to rise again. The shares could get cheaper still before they start to recover.

A growth opportunity

Not all housebuilders expect profits to fall. A number of companies focusing on affordable housing and the rental sector are reporting strong demand and expect continued growth.

One example is AIM-listed Inland Homes (LSE: INL), which has just reported a 66% increase in full-year revenue. This £131m company has previously caught my eye due to the stock’s attractive discount to its net asset value. The firm’s shares hit a 52-week high of 73.7p earlier this year but have since slipped to 66p in line with the fall in housing stocks.

I think this sell-off my have gone too far. In today’s year-end trading update, Inland’s management said the number of houses it sold into the open market rose by 46% to 275 last year. The group also inked major deals to build houses for top 10 housing association A2 Dominion and rental fund KCR Residential REIT.

Another source of profit for the company is its land bank, which is larger than you might expect for a £131m firm. That’s because a significant part of the business is focused on acquiring land to which it can add value, for example by gaining planning permission. The land is then sold on to developers.

The group sold 837 land plots last year and ended the year with 6,808, of which 1,547 had planning consent. So Inland has a significant pipeline of potential profit from land sales if it can continue to gain planning permission for new plots.

Discount to fair value?

The Buckinghamshire-based firm expects to report revenue of £150m for the year ended 30 June. That’s a 66.7% increase from last year’s total of £90m. Analysts expect the group’s adjusted earnings per share to be broadly unchanged from last year, at 7.13p (2017: 7.09p).

However, I think this flattish picture doesn’t give full credit to the earning potential of the company’s assets. The City seems to agree — analysts covering the company are forecasting earnings growth of 10% to 7.87p per share next year, which is equivalent to a P/E ratio of just 8.3 at the current share price.

A second source of potential upside is the group’s net asset value. Using the industry-standard EPRA NAV measure, Inland’s net assets were worth 92.8p per share at the half-year point of 31 December. This valuation formula is designed to give a realistic view of the current market value of a property firm’s assets, excluding various non-cash financing and debt items.

At 66p, the shares trade at a 28% discount to their EPRA NAV. In my view, this is a large enough discount to be worth a closer look. If the company can to continue to perform well across a range of markets, then I think it’s fair to expect further gains over the next year.

In the meantime, the shares offer a forecast dividend yield of 2.8% to reward patient shareholders.

The post This 5% yielding dividend stock could help you beat the FTSE 100 appeared first on The Twelfth Magpie.

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• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Inland Homes. 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.