While the rate of inflation may have fallen to 2.5% last month, the prospects for income shares remain bright. Not only could they provide a real-terms return in case Brexit talks cause inflation to spike, they may also highlight businesses that offer good value for money. Furthermore, dividend growth could also indicate where a company has optimism in its future prospects.
With that in mind, here are two FTSE 250 income shares which could be worth buying today. They both seem to offer a mix of income, value and growth potential.
Improving outlook
Reporting on Wednesday was UK home builder and urban regeneration partner Countryside Properties (LSE: CSP). The company’s completions in the first half of its financial year increased by 15% to 1,655 units. This is in line with expectations, with current trading continuing to be robust. Underlying sales price growth has been 3%, with build cost inflation moderating somewhat to around 3% during the period.
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The company appears to have a bright future. The acquisition of Westleigh, a partnerships home builder, for £135.4m could act as a catalyst on the company’s future performance. It is expected to be earnings accretive in the current year and is expected to help boost the company’s bottom line by around 23%. This is due to be followed with further growth of 17% next year, which suggests that the business is enjoying a purple patch.
With Countryside Properties forecast to yield 4% in the next financial year from a dividend which is due to be covered three times by profit, it appears to offer strong income potential. Since it trades on a price-to-earnings (P/E) ratio of 12, it seems to have a potent mix of income and value appeal which could send its share price significantly higher.
Solid growth
Also offering upbeat investment potential within the housebuilding sector is Redrow (LSE: RDW). The FTSE 250-listed company has enjoyed a stunning five-year growth rate, with its bottom line rising at a double-digit pace in each year. Further growth is expected in the next two financial years, with its earnings forecast to increase by 14% this year and by an additional 10% next year.
With a dividend yield of 4% and a payout that is covered 3.4 times by profit, the company’s income prospects appear to be sound. Although the UK economy has experienced a difficult period since the EU referendum, the prospects for the housing market have remained buoyant. This could mean that the company’s P/E ratio of 9 is simply too low given its prospects, with the potential for an upward re-rating being high.
Certainly, Redrow’s share price decline of 4% in the last six months has been a disappointment. But with a solid growth outlook and a sound income opportunity, it could offer a strong turnaround over the medium term.
