Folks have been fearing a downturn in the housing sector for a while now, but first-half results from Barratt Developments in February showed no sign of it, and that reinforced my colleague Royston Wilds confidence in the companys dividends currently set to yield in excess of 7%.
Good results
I think hes right, and I think the same about Taylor Wimpey too. Taylor Wimpeys dividends, including special payments, are expected to deliver a 10% yield this year. We wont see that level every year, but I do expect to see the firms ordinary dividends providing very attractive yields for years to come.
Full-year results, also released in February, showed the same positive trend as seen at Barratt, with chief executivePete Redfern saying: 2018 was another strong year for Taylor Wimpey with good progress against our strategic priorities.
Crucially, he added: Despite ongoing macroeconomic and political uncertainty, we have made a very positive start to 2019 and are encouraged to see continued strong demand for our homes.
House prices
But the talk is all about house prices, so where are they going? Surprisingly, according to the Halifax, February saw a 5.9% rise in prices (after a 3% fall in January), pushing the average property price up to 236,800.
There has been some doubt cast on these latest figures, but at least were not looking at an obvious slump. And even if we do see some cooling, I really dont see how that will afflict housebuilders like Taylor Wimpey. The company was making nice profits back when house prices were 10% lower than today, and will surely still be able to do the same if we see a 10% fall land prices would fall too, and the balance would be little changed.
Taylor Wimpey ended 2018 sitting on record net cash of 644m, even after having paid out 500m in dividends and it has already declared its intention to pay out 600m in dividends for 2019.
If our FTSE 100 housebuilders werent enough, down in the FTSE 250 there are some pretty big dividends on the cards from Crest Nicholson Holdings (LSE: CRST) too.
Hiccup
Crest Nicholson is going through a period of earnings fallback, with a 16% EPS dip last year expected to be followed by a further 13% this year and thats helped push the share price down 20% over the past 12 months.
The dividend has been held at 2017s level and is expected to stay there for the next two years, but the share price fall has pushed the yield up beyond 9% now.
At the end of January, fellow Motley Fool writer Rupert Hargreaves liked the look of the then-10% yields, and it seems the market has followed him as the shares have since blipped up a little including a 5% rise on the day as I write.
Back on track
Crests falling earnings wereblamed by chief executive Patrick Bergin on some challenges in London and with sales at higher price points where political and economic uncertainty has adversely impacted customer demand.
But a revised focus is expected to reduce pressure on margins and get the company back on track over the next couple of years.
Crests pipline is looking good, its landbank is healthy, and again I dont see any serious threat to the sustainability of the dividend.
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