3 reasons to consider Barratt Developments shares in September 2023

Here’s why FTSE 100 housebuilder Barratt Developments (LSE: BDEV) shares could be worth investors’ further research time now.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Lady wearing a head scarf looks over pages on company financials

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Housebuilding stocks are down, including Barratt Developments (LSE: BDEV) shares. Many people already know that.

Higher interest rates for mortgages, a cost-of-living crisis and plunging property prices have all taken their toll on the business activities of housebuilders, leading to lower turnover and profits.

And Barratt Developments languishes at fallen levels along with those of others in the sector such as PersimmonTaylor Wimpey and Bellway.

Should you invest £1,000 in Barratt Developments right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Barratt Developments made the list?

See the 6 stocks

Created with Highcharts 11.4.3Barratt Redrow + tinyBuild PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

But forward-looking conditions seem set to improve. For example, we may be near the top of the interest-rate-raising cycle. And the rate of inflation has been falling.

Housebuilding companies operate notoriously cyclical businesses and that reflects in their share price charts and financial records. But many stocks in the sector have been consolidating. And I see that as an encouraging sign.

All the many investors taking part in the stock market can collectively be wise. So consolidation in share prices may mean the underlying businesses are stabilising. And investors are now likely looking ahead, beyond current challenges in the industry.

But what are they expecting? My assumption is the sector will see better times. And I’d point to three reasons for investors to consider targeting Barratt Developments for deeper research.

High anticipated dividend yield

The first is the high dividend yield. With the share price near 445p, the forward-looking yield is almost 5% for the trading year to June 2025.

However, there are risks relating to dividends. In early September, the company released its full-year report for the year to June 2023. And the directors cut the total dividend for the year by almost 9%.

Looking ahead, City analysts expect further dividend trimming during the current trading year before a big bounce-back next year. But positive forecasts are not nailed-on certainties.

Positive forecasts

Nevertheless, my second reason for considering Barratt Developments now is the strength of positive forecasts. The current year is likely to be terrible for profits. But analysts have pencilled in a robust 30% bounce-back in earnings for the year to June 2025.

Again, we can’t be certain that these estimates will be met. But most observers expect the current woes of the industry to be in the rear-view mirror by the time of next year’s trading.

And that leads to my third reason for considering the stock now.

The directors’ outlook statement

In September, chairperson Caroline Silver acknowledged that the company faces “significant” macro-economic headwinds. In particularly, the higher interest rate environment is affecting mortgage affordability and availability.

But Silver thinks Barratt Developments is well placed to navigate the challenges because of its “proven operational team, a prudent net cash balance and a solid forward sales position.”

The forward order book and the strong balance sheet provide “resilience and flexibility” to adjust to changes in the operating environment in the year ahead, Silver said.

Investors must make their own judgements when considering an investment here. But I see the stock as worth consideration now.

Should you buy Barratt Developments now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

A mature woman help a senior woman out of a car as she takes her to the shops.
Investing Articles

If a 50-year-old puts £500 a month into a SIPP, here’s what they could have by retirement

Investing £500 a month with a SIPP could build a pension pot worth £269,900 or quite a bit more over…

Read more »

A rear view of a female in a bright yellow coat walking along the historic street known as The Shambles in York, UK which is a popular tourist destination in this Yorkshire city.
Investing Articles

How much do you need to invest in dividend stocks to target a £1,000 passive income?

Want to earn an extra £12,000 each year with dividend stocks? Zaven Boyrazian explores how much money investors need to…

Read more »

Finger pressing a car ignition button with the text 2025 start.
Investing Articles

FTSE shares for beginners: 2 solid picks to consider when starting a Stocks and Shares ISA

For those new to investing, Mark Hartley explains why he believes these two FTSE shares could help kickstart a resilient…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Here’s how to invest £10k to target a 7% dividend yield in 2025

Want to earn a lucrative and sustainable 7% dividend yield? Zaven Boyrazian explains the strategy he uses to generate plenty…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

I’m taking Warren Buffett’s advice as stocks reach record highs

Warren Buffett's wisdom is guiding my investing strategy in 2025 as stocks start reaching new all-time highs. Here's how I'm…

Read more »

Young woman carrying bottle of Energise Sport to the gym
Investing Articles

See what £10k invested in Legal & General shares in January is worth today

On the face of it, Legal & General shares have been a massive disappointment, says Harvey Jones. Yet the FTSE…

Read more »

DIVIDEND YIELD text written on a notebook with chart
Investing Articles

This FTSE 100 stock yields 9.36% but I still wouldn’t touch it with a bargepole!

Harvey Jones is stunned by the massive amount of dividend income on offer from this FTSE 100 stock but is…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

With Barclays’ share price falling behind, which UK bank stock looks better value today?

With the Barclays share price trailing rivals, our writer looks at valuations, dividends and risks affecting another major UK bank…

Read more »