Why Barratt is a FTSE 100 dividend stock that could help you to beat the State Pension

FTSE 100 (INDEXFTSE:UKX) member Barratt Developments plc (LON: BDEV) could boost your retirement savings.

| 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.

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

With the State Pension amounting to just under £164 per week, many people are going to find themselves in need of alternative sources of income in retirement without doubt. The FTSE 100 continues to offer a relatively impressive yield, which is just below 4%. However, housebuilder Barratt (LSE: BDEV) could deliver a significantly higher income return over the medium term.

Of course, it’s not the only FTSE 350 share with dividend-investing potential. Reporting on Tuesday was a FTSE 250 share with a yield that appears to be well-covered at the present time.

Strong performance

That company is precious metals mining group Polymetal (LSE: POLY). It reported half-year results which showed it was able to deliver an impressive financial performance. Revenue increased by 16% to $789m, driven by gold equivalent production growth of 11%. Average realised prices were up 6% for gold, while silver was down 4%.

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

See the 6 stocks

All-in sustaining cash costs amounted to $893/GE oz, which was a 1% reduction on the same period in the prior year. Costs are due to decline further in the second half as a result of seasonally-higher production and sales.

Looking ahead, Polymetal is expected to report a rise in earnings of 32% in the next financial year. This means that dividend growth could be impressive, with the stock expected to yield 7% in 2019. While the gold price could be volatile as US interest rates rise, the company’s shareholder payouts are expected to be covered twice by profit next year. This suggests that further dividend growth could be ahead in the coming years.

Margin of safety

Barratt’s dividend prospects also appear to be highly appealing to those investing for retirement. The company has one of the highest yields in the FTSE 100 at present, when special dividends are included, standing at 8.3%. That’s more than double the yield of the wider index. Since dividends are expected to be covered 1.5 times by profit this year, they seem to be highly sustainable and could even increase over the medium term.

Although the outlook for the UK economy continues to be challenging ahead of Brexit, housebuilders are still reporting positive trading conditions. Demand is ahead of supply and this could be helped further by low interest rates and the government’s Help to Buy scheme over the next few years. As such, the financial performance of housebuilders could be stronger than many investors are currently anticipating.

With Barratt forecast to post a rise in its bottom line of 4% in the next financial year, its outlook seems to be upbeat. Its price-to-earnings (P/E) ratio of 7.8 indicates that it could offer a wide margin of safety should trading conditions deteriorate during the Brexit process. As such, now could be a perfect time to buy, with the potential to provide an impressive income return to boost the State Pension.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

Peter Stephens owns shares of Barratt Developments. 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

Road 2025 to 2032 new year direction concept
Investing Articles

Here’s the latest 12-month Nvidia stock price growth forecast

Is Nvidia stock still worth considering as it quietly creeps towards another record high? Ben McPoland considers a few key…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

This dividend stock offers a high 13.5% yield and could be 60% undervalued

An income stock with a very high yield, and with technology growth prospects, will carry risk too -- but it…

Read more »

Close-up of children holding a planet at the beach
Investing Articles

Up 79% in 5 years, this UK travel stock is still a Strong Buy, according to brokers

Our writer thinks Hostelworld (LSE:HSW) is an interesting small-cap UK stock that might be worth considering for an ISA today.

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

Looking for cheap growth shares? Here’s one I think investors MUST consider right now

Market jitters over the global economy mean many top growth shares continue to trade cheaply. Here's one of my favourite…

Read more »

Close-up image depicting a woman in her 70s taking British bank notes from her colourful leather wallet.
Dividend Shares

Buying 500 Vodafone shares could generate a passive income of…

Jon Smith explains why Vodafone stock still offers him an above-average dividend yield despite the recent dividend cut.

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 For Beginners

3 ways I’m trying to protect my FTSE stock portfolio from rising geopolitical tensions

Jon Smith talks through different measures, including buying gold-related FTSE stocks, that can help his portfolio ride out volatility.

Read more »

Thoughtful man using his phone while riding on a train and looking through the window
Investing Articles

As oil prices tick upwards, should investors buy BP shares?

Dr James Fox takes a closer look at BP shares as oil prices push higher on the back of heightened…

Read more »

Black woman using smartphone at home, watching stock charts.
Investing Articles

I love this grocer… so, should I buy Ocado shares?

Ocado shares are not looking healthy. The stock has truly been through the mill in recent years but is there…

Read more »