Berkeley’s share price slips on results-day, but the dividend yields almost 5%!

Despite a weak share price, housebuilder Berkeley is shaping up as a decent dividend-payer within the FTSE 100 index.

| 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.

Young female business analyst looking at a graph chart while working from home

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

One thing housebuilding companies have in common is weak share prices of late, including brownfield developer Berkeley (LSE: BKG).

The firm delivered its full-year results report today (19 June) and the market pushed the stock almost 5% lower in morning trading.

Created with Highcharts 11.4.3Berkeley Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

However, that’s just ‘noise’. The business is performing well considering the difficult conditions in the sector. And the company has been rewarding shareholders via dividends and share buybacks.

Should you invest £1,000 in ASOS 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 ASOS made the list?

See the 6 stocks

Decent shareholder returns

For the trading year to 30 April 2024, total ordinary dividends will be worth 92p per share, up from 91p the year before.

That’s modest progress, but Berkley also plans to pay a special dividend of 174p per share in September 2024. On top of that, the firm spent just over £72m buying back its own shares during the year and around £155m the previous year.

Share buyback programmes can be controversial because sometimes companies get carried away and buy back shares when the market has a high valuation on the stock.

However, that doesn’t look like the case with Berkeley. So reducing the share count may be a good thing. The money for dividends will be distributed over fewer shares, which pushes up the payment for each one.

For dividend-hunting investors, I think Berkeley looks attractive. With the share price near 4,802p, the ordinary dividend is yielding in the ballpark of 2%. But adding in special dividends, the anticipated yield jumps to almost 5%.

The company said it’s “on track” to continue with the current shareholder returns programme into the future. However, the intention is to “remain agile” and ready to switch the emphasis to invest in value-accretive opportunities when they arise.

Investing for growth

If the company can’t find ways of investing money to produce risk-adjusted returns, it has the policy of returning surplus capital to shareholders. However, the business now plans to develop its own build-to-rent platform, “alongside its core trading business”. Therefore, from 2027, surplus capital will be allocated to that project.

It’s an “attractive” opportunity to maximise the value of Berkeley’s brownfield regeneration sites, the directors said.

During the year, 87% of the homes built by the business were on regenerated brownfield land. But will the new build-to-rent platform suck money from shareholder returns?

There’s some risk of that. But the project is aimed at enhancing the growth prospects and overall returns of the business. So it may boost returns for shareholders in the long run.

Chief executive Rob Perrins said the company has a clear capital allocation strategy. First, it ensures financial strength reflects the cyclical nature and complexity of brownfield development and is appropriate for the prevailing operating environment.  Second, it invests in land and work in progress at the “right” time. Third, it makes returns to shareholders through dividends and share buybacks.

As with all companies in the sector, Berkeley comes with risks for shareholders, not least of which is the fierce cyclicality in homebuilding.

However, on balance, I see the stock as worth further and deeper research with a view to adding some of the shares to a diversified portfolio focused on the long term.

Should you invest £1,000 in ASOS 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 ASOS made the list?

See the 6 stocks

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.

More on Investing Articles

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

2 stocks to consider buying in July for the long-term travel boom

There are numerous ways to play the long-term growth in travel demand. Our writer highlights two stocks to consider for…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Warren Buffett’s 4 goals contain lessons for all investors! Here they are

Billionaire investor Warren Buffett once set out his four ongoing goals. Our writer reckons they are instructive for investors at…

Read more »

Portrait Of Senior Couple Climbing Hill On Hike Through Countryside In Lake District UK Together
Investing Articles

Rome wasn’t built in a day, and neither is £51k a year in passive income!

Our writer highlights a FTSE 100 stock that he thinks could beat the market long term and help target a…

Read more »

Happy woman commuting on a train and checking her mobile phone while using headphones
Investing Articles

This FTSE 100 outperformer keeps going from strength to strength

3i shares might be up 670% over the last 10 years, but Stephen Wright thinks there’s more to come from…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

Scottish Mortgage is a passive income superstar! Who knew?

Harvey Jones gets the surprise of his investment life when he discovers just how much passive income this top FTSE…

Read more »

Night Takeoff Of The American Space Shuttle
Investing Articles

This SpaceX-linked AIM growth stock is up 100% this year! Time to buy?

This UK growth stock has doubled in 2024 thanks in part to a lucrative US deal. With strong margins and…

Read more »

Rolls-Royce's Pearl 10X engine series
Investing Articles

The Rolls-Royce share price hit yet another record high last week! Still time to buy?

The Rolls-Royce share price has soared 2,287% in under five years and in recent days hit a new all-time high.…

Read more »

Two business people sitting at cafe working on new project using laptop. Young businesswoman taking notes and businessman working on laptop computer.
Investing Articles

£10,000 invested in Palantir stock 2 years ago is now worth…

I’m under no illusion that some long-term investors in Palantir stock will be considering an early retirement. The stock has…

Read more »