Investors looking outside the FTSE 100 for dividend stocks can’t afford to look past Bovis Homes Group (LSE: BVS) today, I believe.
Last time I wrote about the share back in March I alluded to the FTSE 250 firm’s pledge to fork out special dividends through to the close of the decade. And while the Bovis share price may have continued soaring since then, the impact of this plan on the City’s dividend projections means that yields still stand on the side of eye-popping.
An anticipated 101.8p per share dividend for 2018, and the predicted 102.4p reward for next year, means the yield stands at a formidable 8% to the end of next year.
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Too cheap to miss?
Sure, Bovis won’t be to the taste of all share pickers owing to the weakening of the British housing market over the past year. But I would argue that a forward P/E ratio of 13.5 times (and corresponding PEG reading of 0.3) certainly bakes in the possibility of earnings projections missing their mark.
Not that I believe there is reason to fear the housebuilder falling short of the anticipated 40% and 14% profits improvements forecast for 2018 and 2019 respectively. Halifax might have noted that home prices ducked 3.1% in April, but as the building society added, these monthly releases tend to be volatile.
Indeed, Halifax added that a robust labour market should still facilitate annual growth in average property values over the course of 2018. It also once again alluded to the low housing stock in Britain, another factor that should keep earnings at the likes of Bovis streaming in, thanks to the increasing importance of new-build properties.
And the Kent-based company has ambitious plans to capitalise on the country’s homes shortage by ramping up its completions to 4,000 per annum by 2020 (compared with 3,645 last year).
Payouts motoring higher
Its pukka profits outlook and exceptional cash flows — net cash jumped to £144.9m in 2017 from £38.6m a year earlier — may indeed make Bovis a brilliant selection for income chasers. But I reckon those seeking income should give FTSE 100 stock Admiral Group (LSE: ADM) a close look as well.
Although earnings are expected to only fractionally improve in 2018, the car insurance colossus is still predicted to lift the dividend with 115.2p per share, up from 114p last time, resulting in a gigantic 6% yield. Moreover, with profits increases expected to rev to 6% in 2019, a meatier dividend hike is forecast, to 119.7p. This means the yield rocks in at 6.2%.
The increasingly-competitive car insurance market here in the UK is no secret, but with premiums still rising across the industry, I believe Admiral can look forward to steady profits growth from this critical division.
Besides, with the insurer’s overseas divisions coming on leaps and bounds, I am convinced the bottom line should continue rising long into the future. And a slightly-heavy forward P/E ratio of 15.5 times is a small price to pay for this exposure, in my opinion.
