But with house prices at record highs in many areas, and landlords facing increased costs, making money from renting isn’t as easy as it might seem. In this article, I’ll explain why I think investors are likely to enjoy stronger returns from property stocks.

A record year

FTSE 250 housebuilder Bovis Homes Group (LSE: BVS) is rebounding strongly from a build quality scandal which hit the firm’s profits in 2016 and 2017. Results out today show that pre-tax profit rose by 47.5% to a record £168.1m last year, beating market expectations.

This increase wasn’t achieved by cranking out more houses. The number of homes completed by the company only rose by 3% last year, and the average selling price was only 0.3% higher.

Instead, Bovis boss Greg Fitzgerald has put in place a number of measures to improve the profit margin on each home. These include changes to the pricing, specification and build processes used. Looking ahead, the company is introducing a new housing range, Phoenix, this year. This is expected to deliver a 3% improvement in profit margins compared to equivalent previous designs.

These changes have pleased home-buying customers too. The company says that it’s on track to earn a four-star customer satisfaction score in the 2018 Home Builders Federation survey — up from just two stars in 2017.

Cash flow supports 9% yield

Last year’s strong performance left the group with a net cash balance of £126.8m, with a further £68m due soon from a joint venture project in Wellingborough. As a result, the ordinary dividend will rise by 20% to 57p per share. Shareholders will also receive a 45p per share special dividend, giving a total payout of 102p per share — that’s a yield of 9.5%.

Analysts expect a similar payout in 2019. Consensus forecasts currently show a total dividend of 100.4p per share for this year, giving a prospective yield of 9.4%. That looks higher to me than the average yields available on rental properties these days.

Although the economic outlook remains uncertain in the UK, Bovis says sales so far this year have been 15.7% higher than during the same period last year. Almost half of this year’s forecast revenue has already been secured. I believe Bovis remains a good alternative to buy-to-let.

How safe is this 8% payout?

I’m less confident in the 8% dividend yield being offered by FTSE 100 travel group TUI AG (LSE: TUI), whose brands include First Choice, Hapag-Lloyd Cruises and Crystal Ski. In early February, the firm’s shares fell by nearly 20% after it warned of pressure on profit margins for summer 2019.

The group now expects profits to be broadly flat this year, versus previous forecasts of 10% growth. Analysts have cut their earnings forecasts for the current year by about 10%, but the shares have now fallen by 30% since the start of the year.

This has left the shares looking cheap, on 7.7 times forecast earnings and with a dividend yield of 8.1%. However, I think there’s a significant risk of more bad news and perhaps a dividend cut.

I’ve previously admired TUI’s progress, but with profit margins falling and an uncertain outlook, I think it’s too soon to get involved here. I’d avoid this stock for now.

The post Forget buy-to-let. I’d collect 9% from this FTSE 250 property stock appeared first on The Twelfth Magpie.

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Roland Head owns shares of Bovis Homes Group. 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.

I suspect Mr Fitzgerald was motivated more by the knowledge that shares in the company he runs were priced to give an 11.4% dividend yield at that time. The Bovis share price has recovered somewhat since then and the forecast yield on the stock has fallen to 10.4%.

Trading figures released today make it clear that for 2018 at least, this yield is very real and will be delivered. At a time when the best easy access cash ISA rate is just 1.45%, I think it’s worth considering the income potential of dividend stocks.

That’s certainly what I’ve done in my own portfolio, which includes some Bovis shares. Today I want to explain why I remain a buyer of this housebuilder. I’ll also highlight another 10% dividend stock I own.

Ahead of expectations

Brexit was dominating the headlines on Wednesday morning, but the only comment from Bovis was that the resulting uncertainty had slowed sales of its larger homes. To address this — and the risk of a wider slowdown — the company is increasing its focus on sales to housing associations.

The firm’s figures for 2018 certainly seem impressive. Profits for the year are expected to hit a record high and be “slightly ahead” of market forecasts. The number of homes built rose by 3% to 3,759 and the group’s HBF customer satisfaction rating has increased from 2 star to 4 star.

Bovis will pay a total dividend of 102p per share for 2018, giving a yield of 10.4% at the last-seen price of 980p. But it’s worth noting that 45p of this is a special dividend, which may not be repeated in future years.

However, the group’s ordinary dividend alone still provides an attractive yield of 5.8% and is less likely to be cut, unless profits really collapse. I think Bovis is one of the best buys in the housing sector.

A 10% buy-and-hold stock?

Bovis isn’t the only 10% yielder in my portfolio. I also own shares of payment processing group PayPoint (LSE: PAY). This company’s main business is providing payment processing services to convenience stores and corner shops.

Historically, the firm’s focus was on allowing customers to make cash payments for bills such as utilities and mobile phone top-ups. But the group is expanding its services. Its newest systems also handle tasks such as parcel drop-offs, card transactions and stock management.

The company’s equipment is now installed in more than 28,800 shops in the UK, and its Collect+ parcel drop-off service is now available at more than 7,000 sites. As far as I can see, PayPoint doesn’t have any direct competitors in the UK.

The firm’s business model doesn’t require high levels of investment and can easily be scaled to add new customers. These characteristics have helped to make this a very profitable business, with strong cash generation.

The current forecast dividend yield of 10% is made up of a mix of ordinary and special dividends. I believe the total payout could fall as the firm nears the end of a period of cash returns. But I estimate that a yield of 7%-8% should be supportable. I may buy more of this stock.

The post Forget the top cash ISA rate. I’m collecting 10% from this FTSE 250 dividend stock appeared first on The Twelfth Magpie.

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Roland Head owns shares of Bovis Homes Group and PayPoint. The Motley Fool UK owns shares of PayPoint. 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.

Shares in the FTSE 250 firm were down by 9% at the time of writing, despite the company confirming expectations for “a record year of profits” in 2018.

Sales are on track

There certainly was some good news. The firm says that it’s sold all of the houses it plans to complete in 2018, at prices that are “in line with our expectations.” Sales per outlet are unchanged from last year, averaging 0.51 per week — so there’s no obvious sign of a slowdown.

Another piece of good news is that the government has extended the Help to Buy scheme by two years to March 2023. Although the scheme will be tapered from March 2021, Bovis says it doesn’t expect any reduction in the use of the scheme in the meantime.

This worries me

In today’s update, the firm said that 15% of reservations during the second half have included a part exchange. The firm says Brexit worries are putting off “discretionary buyers” — presumably this means people who already own a house and don’t need to move.

In my view, this is a concern. Part-exchange deals can tie up a lot of company cash. Only 8% of houses were sold with a part exchange during the first half of the year. The sudden increase in H2 suggests to me that this may have been the only way the firm could hit its sales targets for 2018.

Buy, sell or hold?

As a shareholder, I intend to sit tight for now. I suspect that the business is in reasonable health, if you’re prepared to ignore Brexit jitters.

After Thursday’s sell-off, Bovis stock offers a forecast dividend yield of 10.8%, and trades at just 1.2 times its book value. I can see this as a Brexit recovery buy.

Buy this safe haven?

Mining stocks aren’t generally seen as safe choices. But gold tends to be in demand during times of uncertainty. We saw this on Thursday when shares of Egypt-based gold miner Centamin (LSE: CEY) gained 4%, while domestic stocks were falling.

Centamin has had its share of problems this year. Production guidance has been cut more than once. Indeed, the firm’s recent third-quarter update included news of another cut.

Despite this, the company’s core attractions remain intact. This FTSE 250 firm has fairly low costs, net cash of $292m, and a modest valuation.

An income buy?

Analysts expect this miner’s earnings to rise by 24% to $0.10 per share in 2019, putting the stock on a modest forecast P/E of 12.5. As in previous years, I’d expect these earnings to be closely matched by free cash flow, supporting further dividend growth.

At current levels, Centamin’s cash balance covers around 20% of its share price. This should provide good support for the dividend, which is expected to yield 4.5% this year, and 6% in 2019.

Owning shares in a profitable gold miner can be a good way to diversify your portfolio. I’d rate these shares as a buy at under 100p.

The post Have £1,000 to invest? 2 FTSE 250 stocks I’d buy for a Stocks & Shares ISA appeared first on The Twelfth Magpie.

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Roland Head owns shares of Bovis Homes Group. 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.

Last time I wrote about the share back in March I alluded to the FTSE 250 firm’s pledge to fork out special dividends through to the close of the decade. And while the Bovis share price may have continued soaring since then, the impact of this plan on the City’s dividend projections means that yields still stand on the side of eye-popping.

An anticipated 101.8p per share dividend for 2018, and the predicted 102.4p reward for next year, means the yield stands at a formidable 8% to the end of next year.

Too cheap to miss?

Sure, Bovis won’t be to the taste of all share pickers owing to the weakening of the British housing market over the past year. But I would argue that a forward P/E ratio of 13.5 times (and corresponding PEG reading of 0.3) certainly bakes in the possibility of earnings projections missing their mark.

Not that I believe there is reason to fear the housebuilder falling short of the anticipated 40% and 14% profits improvements forecast for 2018 and 2019 respectively. Halifax might have noted that home prices ducked 3.1% in April, but as the building society added, these monthly releases tend to be volatile.

Indeed, Halifax added that a robust labour market should still facilitate annual growth in average property values over the course of 2018. It also once again alluded to the low housing stock in Britain, another factor that should keep earnings at the likes of Bovis streaming in, thanks to the increasing importance of new-build properties.

And the Kent-based company has ambitious plans to capitalise on the country’s homes shortage by ramping up its completions to 4,000 per annum by 2020 (compared with 3,645 last year).

Payouts motoring higher

Its pukka profits outlook and exceptional cash flows — net cash jumped to £144.9m in 2017 from £38.6m a year earlier — may indeed make Bovis a brilliant selection for income chasers. But I reckon those seeking income should give FTSE 100 stock Admiral Group (LSE: ADM) a close look as well.

Although earnings are expected to only fractionally improve in 2018, the car insurance colossus is still predicted to lift the dividend with 115.2p per share, up from 114p last time, resulting in a gigantic 6% yield. Moreover, with profits increases expected to rev to 6% in 2019, a meatier dividend hike is forecast, to 119.7p. This means the yield rocks in at 6.2%.

The increasingly-competitive car insurance market here in the UK is no secret, but with premiums still rising across the industry, I believe Admiral can look forward to steady profits growth from this critical division.

Besides, with the insurer’s overseas divisions coming on leaps and bounds, I am convinced the bottom line should continue rising long into the future. And a slightly-heavy forward P/E ratio of 15.5 times is a small price to pay for this exposure, in my opinion.

The post One FTSE 100 (and one FTSE 250) dividend hero I’d buy with £2,000 appeared first on The Twelfth Magpie.

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Royston Wild 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.

An extreme turnaround?

Newspaper group Trinity Mirror (LSE: TNI) owns the Daily Mirror and a raft of regional papers. But the group is struggling to deal with the shift from print publishing to online.

Because of its uncertain future, the shares currently trade on a forecast P/E of just 2.1, with a prospective yield of 7.9%. Is this a true bargain, or a short cut to investing disaster?

No surprises today

A trading update on Friday suggests that the company is holding its own, at least for now. Full-year profits are expected to be in line with expectations. This seems to confirm analysts’ forecasts for earnings of 34.3p per share.

However, the shift away from print shows no sign of slowing. Trinity confirmed that like-for-like group revenue is expected to fall by 9% during the fourth quarter. Print advertising sales are expected to be down by 21%, while circulation revenue is expected to fall 7%.

Although Trinity Mirror’s net debt has fallen to a level that no longer concerns me, the group’s £406m pension deficit is a risk. The company has now agreed to pay £44m per year into its pension scheme for the next 10 years, up from £36m previously.

A two-part plan

Chief executive Simon Fox has cut costs relentlessly and continues to do so. Online growth is also strong, with revenue from online advertising expected to rise by 20% during the final quarter.

The second part of Mr Fox’s plan is more ambitious. He is in talks to acquire publishing rival Northern & Shell, whose titles include the Daily Express, Daily Star, and OK! Magazine.

By combining the two groups’ operations, Mr Fox would hope to cut out a big chunk of costs. Together with online growth, this could create a viable long-term business.

Risk and potential reward both seem high to me here. I’m still undecided about whether to invest.

A simpler choice

One turnaround stock which looks more straightforward is Bovis Homes Group (LSE: BVS). New chief executive Greg Fitzgerald appears to be doing a good job of rebuilding profits after a difficult period where sales — and build quality — fell below expectations.

Mr Fitzgerald now expects the group to end 2017 with net cash of at least £100m and to deliver “a significant improvement in profits for FY 2018”.

City analysts’ consensus forecasts suggest that this will result in earnings of 91.9p per share in 2018, putting the stock on a forecast P/E of 12.3. However, what’s more interesting is that analysts seem to expect Bovis to start returning surplus cash to shareholders next year.

Forecasts I’ve seen suggest a total dividend payout of 98.4p per share in 2018, giving a forecast yield of 8.7%. Based on the group’s recent cash generation, this looks affordable to me.

Although the outlook for the housing market is unclear, new house sales appear to remain strong. Mr Fitzgerald also has the opportunity to increase profit margins to industry-average levels, which could boost profits even if sales are flat.

In my view, Bovis Homes could be an attractive buy at current levels.

The post These unloved 8%+ yielders could help you retire a millionaire 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 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.

Banking on Britain

Woodford’s shift has been “designed to capture a contrarian opportunity that has emerged in domestic cyclical companies where valuations are too low and future growth expectations far too modest.”

Banking is central to Woodford’s thesis about growth expectations. Up until this year, he maintained that the reason banks weren’t lending was simply because they didn’t have enough capital. He now believes they do and reckons they’re well placed to increase both lending and dividends for shareholders.

Pariah no more

Woodford has built up a big stake in Lloyds this year but revealed just a few days ago that he’s also been buying shares in Royal Bank of Scotland (LSE: RBS) and Barclays. The Scottish bank remains a pariah for a lot of investors but Woodford sees bright prospects, due to many of the reasons discussed recently by my Foolish colleague Rupert Hargreaves.

At a current price of 275p, RBS trades on a cheap forecast 2018 price-to-earnings (P/E) ratio of 10.6, with City analysts also expecting a 3.3% dividend yield. Personally, I’m not convinced that the time is ripe to invest in the still-70%-state-owned bank. However, confidence is on the rise judging by only four brokers currently rating the stock a ‘sell’ compared with 11 this time last year.

Strong industry fundamentals

Housebuilders are another of Woodford’s major plays on the UK domestic economy. FTSE 100 giants Taylor Wimpey and Barratt Developments feature prominently but there’s a host of others, including mid-cap Bovis Homes (LSE: BVS), which released a trading update today.

On the broad backdrop for housebuilding, Bovis said: “The demand for new homes continues to be robust across all our regions and customer interest remains good. The industry fundamentals are strong given the Government’s housing policy, in particular Help to Buy, the low interest rate environment, and the competitive mortgage market.”

House call

On Bovis’s own performance, management reported “strong sales,” “a high level of customer satisfaction” and that “initiatives to simplify and streamline our operating structure to reduce costs and make us more agile, are progressing well.”

As a result, the board said it’s confident of delivering on profit expectations this year and “a significant improvement in profits for FY 2018.” At a current share price of 1,120p, the forecast 2018 P/E is 12.4, while dividend forecasts imply a whopping yield of 8.4%.

Of course, Woodford’s big bet on banks, housebuilders and other domestic stocks rests to a large degree on a sanguine view of Brexit. He and his team see “considerable grounds for optimism that the long-term outcomes for the UK economy will be far better than the alarmed consensus would suggest.”

The post Royal Bank of Scotland Group plc isn’t the only new stock Neil Woodford has bought appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. 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.

Brexit was a mistake

Generally speaking, I believe Brexit was a mistake, and I fear the UK economy will suffer in the long run. That said, my pessimism doesn’t extend to the UK housebuilding sector. Indeed, all the housebuilders I tipped following the EU referendum have gone on to post spectacular share price gains. So well done to those who were paying attention. But what about those who missed out on the recovery, surely it’s too late?

Not necessarily. Granted, the sector is exposed to increased uncertainty and hence risk, but the housing demand and supply fundamentals remain the same. There is a shortage of affordable housing in this country, and consumer demand has remained resilient since last year’s referendum. Our leading housebuilders are still paying out very generous dividends and I’m still pretty bullish on them all – except for one.

Now it’s different

Some of you will remember me singing the praises of Bovis Homes (LSE: BVS) last October. I remarked that the Kent-based developer was likely to break the £1bn revenue barrier in 2016, and that it would continue to hike its full-year dividend payouts. Both of those forecasts transpired, and the share price has climbed 30% since my recommendation on 26 October. But 10 months on, things are a little different.

Earlier this year the FTSE 250 group reported a 3% dip in pre-tax profits, as it was forced to pay compensation to customers as a result of poorly-built homes. The company has since put in place a taskforce to address the issues, with a £10.5m provision to cover the cost of any remedial work and to pay appropriate compensation to affected customers.

Takeover bids

The company is now slowing its rate of production and targeting completion volumes for 2017 to be around 10%-15% below the 2016 level. This is likely to have a significant impact on profitability. The Chief Executive, David Richie, has since resigned, and the company has rejected takeover bids from rivals Redrow and Galliford Try.

I certainly wouldn’t deter existing shareholders from holding onto their shares for the long term, but I think new investors should seek out other alternatives given Bovis’s current issues.

A better alternative?

A good place to start could perhaps be Taylor Wimpey (LSE: TW). The top-tier residential developer gave a pretty good account of itself earlier this month when it announced its half-year results for the first six months of 2017.

Trading through the first half has been very positive, supported by favourable UK housing market fundamentals and good customer confidence. A special dividend of 10.4p per share was announced in addition to the regular interim dividend which itself was hiked to 2.3p per share.

The prospective yield now stands at 7.1%, rising to 7.8% next year, and the shares are available at a bargain 10 times forecast earnings, falling to just nine times for 2018.

The post One dividend stock I’d buy right now, and one I’d avoid appeared first on The Twelfth Magpie.

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Bilaal Mohamed has no position in any 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.

The first reason I’d look to dump Bovis is that at this point in the economic cycle, investing in homebuilders is a frightening scenario to my mind. Demand growth picked up nicely immediately following the end of the recession but now tepid economic growth, the increasing threat of rising interest rates and possibility of a new government approach to the help-to-buy scheme make me nervous.

On top of this, Bovis has been knocked recently for the low quality of its homes. This led to its former CEO being ousted and the appointment of a new head honcho who is currently conducting a strategic review to be finalised and released in September. This whole scenario suggests big changes could be afoot, giving me more than enough reason to stay away from the company until such changes are announced.

Then there is the fact that competitors look to me to be much more interesting investment options if I were minded to invest in the sector. For one, with net debt of £33m, Bovis’s balance sheet is significantly weaker than that of larger competitors such as Persimmon, which had over £1.1bn in cash lying around as of the end of June. The company’s operating margins of just 15.2% last year also leave much to be desired compared to competitors whose margins hit as high as 25%.

And the company is no bargain basement buy either with its shares priced at 12.8 times forward earnings. This is a significant premium to the likes of Persimmon at 10.2 times forward earnings, Taylor Wimpey at 9.7 or Barratt at 9.6. With competitors in better shape financially and operationally, Bovis is one homebuilder I wouldn’t touch with a 10-foot barge pole.

Flying into headwinds? 

Wizz Air (LSE: WIZZ) is another FTSE 250 growth star that is looking increasingly overbought to me. Shares of the discount airline have soared over 60% in the past year and now trade at a hefty 13.4 times forward earnings, which is pricey for an airline.

What makes me nervous in this case is that across Europe, demand growth for airfares is slowing at the same time as budget carriers are adding capacity by significant amounts year after year. Indeed, in the year to March, Wizz Air increased its passenger numbers by 19% while competitors such as easyJet and Ryanair also increased the number of seats available by high single-digits or low double-digits.

All of this is leading to a fares war across the sector that caused Wizz’s revenue per available seat kilometre (the key industry metric) to fall by 8.5% year-on-year. Revenue still increased 10% during the period due to offering more seats, but this situation certainly appears to be the start of a repeat of the traditional boom and bust cycle airlines have always been stuck in. At this point in the cycle, I’d avoid Wizz Air, especially at its current valuation.

The post Two high-flying FTSE 250 stocks I’d dump today appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any 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.

Bovis Homes (LSE: BVS) is the latest housebuilder to confirm the supportive trading outlook for the industry, the company advising today that trading in the year to date is in line with expectations.

The FTSE 250 company noted that “customer interest in our homes remains strong with prospects per active outlet consistently ahead of the prior year level for the past eight weeks.” And Bovis added that “demand for new homes remains robust across all regions and overall we have seen some modest house price inflation in the period.”

Bovis has clocked up 0.48 net private reservations per site per week so far in 2017, it advised, in line with the company’s production target for the full year.

Long-term lovely

But the Longfield-based business is not without its share of troubles, of course.

Bovis has been forced to put the brakes on house production after February’s admission that it had paid customers to move into its homes before they had been completed in order to meet output targets.

The builder now expects production volumes to fall between 10% and 15% in 2017 from last year’s levels, meaning that some 1,500 homes should be built in the first half. Bovis affirmed that it expects building levels to return to normal numbers after the current period, however.

As if this wasn’t problem enough, the construction colossus is also battling against a backcloth of rising costs as both subcontractor fees and materials prices mount. As a consequence, the City expects earnings to drop 17% in 2017, worsening from the 6% fall punched in the prior period.

Still, with mortgage lending rates becoming ever-more favourable, and the number of existing properties entering the market steadily declining, Britain’s supply crunch looks unlikely to remedy itself any time soon. And this bodes well for the likes of Bovis, naturally, underpinning broker predictions of a 13% bottom-line rebound in 2018.

I reckon a forward P/E ratio of 12.5 times is great value given that the long-term industry outlook remains largely supportive. And with the company also sporting a super 4.6% dividend yield, I reckon Bovis is a stellar pick for value investors.

In the fast lane

As trade accelerates sharply in its overseas markets, I believe dividends should keep marching higher at National Express (LSE: NEX).

The coach-and-train operator has been busy on the acquisition front to build its international presence, a shrewd strategy given that trading conditions abroad keep on improving. National Express saw revenues in North America soar 14.3% in 2016 at constant currencies, for example. And the company made eight bolt-on buys last year alone to keep sales soaring Stateside.

Like Bovis, National Express also offers exceptional value at current share prices. The Birmingham firm’s revived growth picture is expected to produce a 7% earnings rise in 2017, creating a P/E multiple of just 12.3 times.

So unsurprisingly the City is also bullish on National Express’s dividend prospects, meaning the business sports a 3.8% dividend yield for 2017 alone. I reckon both stocks should prove fruitful destinations for income chasers in the years to come.

The post 2 top dividend stocks trading at bargain valuations appeared first on The Twelfth Magpie.

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• Down 81% in 2 years, is this beaten-down FTSE 250 stock now in bargain territory?
• Having fallen up to 60.9%! Are these dirt cheap bargain UK shares to buy?

Royston Wild has no position in any 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.

This was underlined by recent news that Redrow (LSE: RDW) has sounded out Bovis Homes as a potential takeover target. Investors should be encouraged by the resilience of the homes market despite the country’s uncertain future, as supportive lending conditions are helping demand to continue outstrip supply growth.

Redrow announced last week that “trading and performance continues to be robust, as a consequence of a record order book and a further increase in legal completions, combined with better than anticipated increases in average selling prices.”

As a result Redrow anticipates that pre-tax profit for the year to June 2016 will ring in at a minimum of £306m, up 22% from the prior 12 months.

Fiery forecasts

And City analysts certainly expect Redrow to remain on an upward trajectory for some time yet, even though earnings expansion is anticipated to moderate along with UK home price growth.

For the year to June 2017 a 14% bottom-line bulge is predicted, and a further 5% advance is predicted for 2018. But with home industry data still continuing to defy gloomy predictions, I reckon Redrow — just like its London-quoted peers — could continue to see brokers upgrading their earnings forecasts in the months ahead.

The builder already deals on a mega-low forward P/E ratio of 7.8 times, a figure that leaves plenty of upside and more than bakes in the possibility of any market turbulence in the near-term and beyond, in my opinion.

But Redrow should also be a star attraction for income chasers, with dividends expected to keep growing at a stratospheric rate. Indeed, last year’s reward of 10p per share is expected to jump to 14.7p and 18.1p in 2017 and 2018 respectively. Consequently the yield shoots from 3% in the present period to 3.6% in the following period.

With Britain’s homes shortage likely to take many, many years to properly address, I reckon Redrow should prove a lucrative stock for long-term share pickers.

Budget brilliance

I also reckon budget retailer B&M European Retail (LSE: BME) should generate exceptional earnings growth in the years ahead.

Not only does it stand to benefit from the impact of rising inflation on shoppers’ pursetrings here in the UK (like-for-like revenues shot 7.2% from October-December), but B&M should also enjoy rising sales in Germany as the upward price creep continues there.

The diversified retailer is expanding in both territories to latch onto continental shoppers’ rising appetite for a bargain.

So the City expects B&M to follow a 14% earnings rise in the period to March 2017 with rises of 10% and 14% in fiscal 2018 and 2019. And I reckon a forward P/E ratio of 18.7 times is a decent level at which to tap into the company’s exceptional cross-continental revenues prospects.

The post 2 FTSE 250 stocks I’d buy and hold for 10 years appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Redrow. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.