ISA investors! Could this unloved 10% dividend yield help you get rich and retire early?
The volatility which has enveloped share markets of late has washed out some pretty good-looking shares. Just as a high tide lifts all boats, the exact opposite is also happens when market makers head for the exits, en masse.
And this leaves plenty of companies trading at dirt-cheap levels. Take Bovis Homes Group (LSE: BVS), for example. The FTSE 250s drop to six-week lows has prompted further weakness in the housebuilders share price too, and this leaves it trading on a forward P/E ratio of just 9.5 times.
But Bovis doesnt just offer top value from an earnings perspective. With dividends expected to keep rising along with profits over the next couple of years, the company also offers blockbusting yields of 10% and 10.2% for 2019 and 2020.
So whats the catch, you might ask? Well, theoretically, the prospect of a an economically-damaging no-deal Brexit hangs heavy over the likes of Bovis, a situation that could hamper housebuyer activity in the near term and beyond.
Such fears were fanned on Thursday following fresh data from the Royal Institution of Chartered Surveyors (RICS) which showed both buyer and seller numbers shrank in September. The survey also showed the number of new constructions last month dropped to the lowest number since around the time of the referendum in June 2016.
Its obvious that Brexit is wreaking havoc on the broader housing market, though I would argue this is not as much of a problem for the newbuild specialists. Put simply, there arent enough new homes to go around to support the growing numbers of first-time buyers, people who still need somewhere to live whatever the broader economic climate.
This is why Bovis for one continues to witness solid revenues and profits progress, the firm seeing the top and bottom lines grow 9% and 20%, respectively, in the first half of 2019. And it looks as if the same factors that are driving homebuyer demand namely, confused government housebuilding policy, low Bank of England interest rates, and the Help to Buy purchase incentive scheme are here to stay for much longer.
Another beautiful bargain?
So Bovis is a bona fide bargain and a great buy today, in my opinion. But can the same be said for Dunelm Group (LSE: DNLM), another FTSE 250 dividend share trading on low valuations?
At current prices, the homewares retailer carries a forward P/E multiple of 14.2 times and sports a jumbo dividend yield of 4.1% too. However, I believe this particular shares cheap price is a reflection of its high risk profile.
Dunelm Groups shares sunk 10% on Thursday to eight-month lows on the release of spooky trading numbers. During the 13 weeks to 28 September, like-for-like sales rose 6.4%, although this was around half the rate of growth City analysts had been expecting.
Business has been troubled more recently, Dunelm advising of mixed trading in September due, in part, to a softer homewares market. But signs of growing sales stress isnt the only reason why investors have headed for the exits. The retailer also disclosed it expects margins to come under pressure later in the financial year (to June 2020) as currency headwinds likely increase.
The threat created by the botched Brexit process is far more dangerous for Dunelm than for Bovis, in my opinion. And this is why Im happy to avoid it despite its cheap share price.
Income-seeking investors like you wont want to miss out on this timely opportunity
Heres your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this out-of-favour business thats throwing off gobs of cash!
But heres the really exciting part
Our analyst is predicting theres potential for this companys market value to soar by at least 50% over the next few years…
He even anticipates that the dividend could grow nicely too as this much-loved household brand continues to rapidly expand its online business and reinvent itself for the digital age.
With shares still changing hands at what he believes is an undemanding valuation, now could be the ideal time for patient, income-seeking investors to start building a long-term holding.
Click here to claim your copy of this special report now and well tell you the name of this Top Income Share free of charge!