A tough trading period

Although the average selling price achieved by the firm was up 15% compared to a year ago, most other financial indicators moved in the wrong direction. Legal completions fell 12%, underlying operating profit sank by 40%, underlying basic earnings per share plunged 51%, and net debt shot up by an uncomfortable 150% to almost £76m.

The firm puts the H1 outcome down to “ongoing subdued conditions in the secondary market” and fewer new “first occupations,” which it blames on “a pause in build start activity following the EU Referendum in June 2016.”

Looking forward, uncertainty surrounding the government’s proposals on ground rents continues to hang over the company and it said: “We continue to work with the government to seek an exemption from these changes due to the unique viability model of retirement housing.” 

City analysts following McCarthy & Stone expect earnings to rise 10% for the year to August and 18% in 2019. The firm’s build programmes “remain on track” and the directors expect to return the balance sheet to a net cash position by the end of the current trading year. On the face of it, the immediate outlook is rosy, but the directors sounded a warning saying that fewer land exchanges and planning consents during the first half of the year means the growth trajectory for the business will be “more modest” over the next two years than they expected previously.

Chief executive Clive Fenton said the firm’s long-term prospects are positive because of a “growing need for retirement housing caused by our rapidly ageing population.”  Nevertheless, with the stock locked in the grip of a downtrend and earnings looking peaky, I’m cautious about the company’s big dividend yield and mindful of its cyclicality.

Awash with cash

There’s an even bigger dividend yield available from FTSE 250 constituent housebuilder Bovis Homes Group (LSE: BVS). The big London-listed house builders all seem to be awash with cash and many have announced special dividends for 2018 onwards, including Bovis. With special dividends taken into account, Bovis has a forward yield running around 8.6% for 2018.

In 2017, revenue slipped 3% compared to the year before and earnings per share plunged 25%. However, City analysts’ forward earnings expectations are robust. They predict a 39% uplift this year and 14% during 2019.

Bovis is trading well, throwing off cash and the share price has been rising, but I’m too nervous to buy the stock. With both these two firms I ask myself, will the good times keep rolling? I know they are both highly cyclical firms and I know that cyclicals can look at their most attractive in terms of valuation and quality metrics when they are at their most dangerous. So, for me, the ‘right’ thing to do is to watch from the sidelines.

The post Should you buy big-yielding stocks Bovis Homes Group and this retirement homes builder? appeared first on The Twelfth Magpie.

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Kevin Godbold 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 retirement property builder has seen its share price decline almost 25% over the past year, but tough market conditions are not the only thing that has whacked market sentiment. Indeed, fears over the potentially-crushing impact of changes to legislation that governs ground rents has also coloured opinion against the FTSE 250 business.

McCarthy & Stone said this month that it’s seeking “swift clarification” from the government over its request that retirement properties be exempt from rules that would see ground rents set to zero. The issue is causing the firm no shortage of angst and it said “we continue our planning to mitigate the potential impact on the business, including maintaining discipline around our cash position and adopting a more measured approach to securing land.”

Hot yields

Clearly McCarthy & Stone isn’t without its degree of risk. But I would argue that the troubles facing the company are baked in at current prices, the firm dealing on a forward P/E ratio of 9.5 times.

And for glass-half-full investors, I believe there’s plenty to get stuck into. Despite the impact of Brexit uncertainty on homebuyer appetite right now, the company’s order book still rose 16% year-on-year as of the close of February, to £487m. And once current jitteriness subsides from the broader market, I expect sales to rip higher again as a symptom of Britain’s fast-ageing population.

City analysts are still expecting earnings to rise 10% and 18% in the years to August 2018 and 2019 respectively, despite tough trading conditions. And so dividends are expected to keep leaping higher — last year’s 5.4p per share reward is predicted to step to 5.6p this year and again to 6.3p in fiscal 2019.

Investors can therefore enjoy bumper yields of 3.9% and 4.4% for this year and next. And rest assured, these projections are also looking very safe. Dividend coverage ranges between 2.7 times and 2.8 times through to the close of next year, comfortably above the accepted security benchmark of 2 times and above.

Stamp your mark

I believe another exceptional FTSE 250 selection for income chasers is Royal Mail (LSE: RMG).

Tough competition in the UK is expected to cause a 6% earnings drop in the year to March 2018.  Still, the strength of the courier’s balance sheet means this isn’t expected to put paid to further dividend growth, so last year’s 23p per share reward is expected to swell to 23.7p this year.

And for fiscal 2019, supported by a (albeit fractionally) return to earnings growth, the dividend is predicted to rise to 24.7p. As a result, yields for this year and next clock in at a mighty 4.5% and 4.7%, respectively.

For the upcoming year, Royal Mail deals on a meagre P/E ratio of 12.6 times. And this is far too cheap in my opinion given the brilliant revenue opportunities created by the growing e-commerce segment, not just in Britain but for its expanding European operations, too.

The post 2 top FTSE 250 dividend stocks I’d buy for my ISA 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.

The owner of the Mecca Bingo and Grosvenor Casino gambling houses announced that like-for-like revenues rose 2% during the 16 weeks to October 15.

Sales at Rank Group’s venues continued to fall during the period, with like-for-like takings at Grosvenor and Mecca ducking 1% and 2% respectively. But once again activity across the company’s digital operations saved the day — at its bingo and casino brands these rose 11% and 34% in the four months.

These robust numbers prompted Rank Group to affirm its predictions for the full year.

Bet on Rank

The FTSE 250 firm’s rampant progress in the fast-growing digital area puts it in great shape to deliver stonking earnings growth in the near term and beyond, in my opinion. And I also think the share’s excellent value for money, which makes it a particularly enticing pick right now.

Even though City predictions suggest a fractional earnings rise in the year to June 2018, this results in a forward P/E ratio of 14.2 times, underneath the broadly-accepted value benchmark of 15 times.

What’s more, I also reckon the Maidenhead firm’s ultra-progressive dividend policy makes it worthy of serious attention. Last year Rank Group lifted the full-year payout to 7.3p per share from 6.5p in the prior period, and the number crunchers are expecting it to leap again to 8.1p in the current year.

As a result, Rank Group rocks up with a meaty 3.5% yield. And thanks to its abundant cash flows and bright profits prospects, I am convinced dividends should continue marching steadily higher.

Check it out

Thanks to recent share price weakness, I reckon McCarthy and Stone (LSE: MCS) is another mega-cheap FTSE 250 dividend share worth checking out right now.

The business, which specialises in the construction of retirement properties, is expected to report a 2% earnings uplift in the 12 months ending August 2017. And McCarthy and Stone’s plans to hike building work at its sites is predicted to drive profits 19% higher in the current fiscal period.

Not only does this forward projection mean that it boasts a P/E ratio of just 9.5 times, but it also carries a corresponding PEG reading of 0.5. These expectations of perky profits expansion are anticipated to feed into extra handsome dividend growth too.

The total reward of 4.5p per share shelled out in fiscal 2016 is anticipated to rise to 4.9p in the year just passed, and to jump again to 5.6p in the current 12 months. As a result, the construction colossus sports a meaty 3.5% yield.

I am convinced the consequences of Britain’s ageing population should continue to drive demand for McCarthy and Stone’s properties in the years to come, a trend the business is aiming to capitalise on by lighting a fire under build rates. Indeed, forward orders were up 21% year-on-year as of September as it increased the number of properties it put up.

The post 2 dirt-cheap dividend giants I’d buy today 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.

Upward momentum

Today’s update covered the months from the beginning of March through to July, certainly a very eventful period from a political perspective, and somewhat challenging for the UK’s leading housebuilders and property developers. Political and economic uncertainty is never a good thing when it comes to building an order book.

Nevertheless, the Bournemouth-based developer has seen upward momentum in average selling prices and margins since the beginning of March, reflecting an improvement in its sales mix which it expects to continue into the next financial year. Indeed, average selling prices exceeded £280k per unit, compared to £265k for the same period in 2016, with the total forward order book increasing by £241m since the beginning of March. Total forward sales including legal completions now stand at £659m, representing a significant improvement since the start of the current financial year.

Getting older

With demand for specialist retirement housing on the increase, I continue to be bullish on the group’s long-term prospects. It’s been estimated that the number of people aged 85 and over in the UK will more than double between 2015 and 2035 from 1.5m to 3.2m, with the number of people aged 65 and over expected to increase by more than 50% from 11.6m to 17.2m over the same period.

What I find most intriguing as an investor is that research suggests that although one in four over-60s are interested in retirement living, only around 141,000 units of specialised retirement housing have actually been built. Now that the election is over, I believe the market will look again at the investment potential of this mid-cap retirement specialist, and see that a P/E rating of just 10.7 clearly undervalues a company with such attractive long-term prospects.

Sales dip

Another London-listed firm reporting today was Topps Tiles (LSE: TPT). The UK’s largest tile specialist saw its share price drop by up to 4% in early trading as it confirmed lower like-for-like sales in the third quarter of its financial year, but by late afternoon the shares had almost fully recovered as bargain hunters looked to take advantage of the dip.

The Leicester-based retailer reported a 4.7% dip in like-for-likes sales revenue for the 13-week period ending 1 July. It blamed weaker macroeconomic conditions and a tougher comparative with the previous year when the business benefitted from Stamp Duty changes which led to a surge in the number of housing transactions.

Despite the somewhat disappointing sales figures, I still see the company as a decent long-term investment. The shares are trading at a 20% discount to a year ago, and now look to be in bargain territory at just 10 times forecast earnings for FY2017.

The post 2 top value stocks that could make you rich appeared first on The Twelfth Magpie.

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Bilaal Mohamed 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.