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On the lookout for the most popular dividend development shares to purchase? Right here’s one I believe calls for critical consideration following upbeat buying and selling outcomes on Tuesday (12 August).
Quick-rising dividends
Falling house gross sales have had a devastating affect on some housebuilders’ dividends in latest occasions. Take Bellway (LSE:BWY) of the FTSE 250 — it froze dividends within the monetary 12 months to July 2024, at 140p per share. And it slashed them to 54p the 12 months after.
The excellent news is that Metropolis analysts anticipate industry-wide dividends to rise from right here as homebuyer demand rebounds. At Bellway, they’re anticipating shareholder payouts to develop quickly over the quick to medium time period, as proven beneath:
| Monetary 12 months Ending July… | Dividend per share | Dividend development | Dividend yield |
|---|---|---|---|
| 2025 | 65.4p | 21% | 2.6% |
| 2026 | 78p | 19% | 3.1% |
| 2027 | 93.9p | 20% | 3.8% |
Newest buying and selling information from the corporate at the moment illustrates why brokers are maybe proper to be so assured.
For the 12 months to 31 July, Bellway’s whole completions rose 14.3% to eight,479 houses, whereas common promoting costs nudged as much as £316,000 from £307,909. Each figures got here in forward of expectations.
Revenues had been up 17% at £2.8bn, whereas the underlying working margin rose 1% to 11%. This led Bellway to foretell “sturdy earnings development” for the interval.
Trying forward, a robust order e-book underpins hopes of additional enchancment in monetary 2026. This consisted of 5,307 houses as of 31 July, up from 5,144 the 12 months earlier than, and with a better worth of £1.5bn versus £1.4bn beforehand.
Sturdy forecasts
There are nonetheless dangers to its restoration, in fact. An inflationary spike might curb Financial institution of England price cuts, hitting purchaser affordability. A stagnant economic system and rising unemployment might additionally hit gross sales volumes and promoting costs.
Nonetheless, I consider the builder can meet these upbeat dividend forecasts, even when market situations flip choppier.
For monetary 2026 and 2027, earnings are tipped to rise 15% and 21%, respectively. This implies predicted dividends are coated 2.4-2.5 occasions by projected earnings.
You’ll know that any studying above two occasions is claimed to offer a large margin of security.
Moreover, dividend forecasts are supported by the corporate’s bettering stability sheet. It swung to a internet money place of £42m as of 31 July from internet debt of £10.5m on the similar level in 2024.
Greater completions, moderating construct value inflation, and bettering capital self-discipline ought to proceed to assist money technology going forwards.
An affordable dividend share
Bellway is assured of constructing 9,200 houses this monetary 12 months, up roughly 450 12 months on 12 months. I consider the builder’s in good condition to fulfill this goal, supported by additional rate of interest declines and by its strong landbank.
There are dangers right here, however I believe that is mirrored by the agency’s low valuation. For each monetary 2026 and 2027, Bellway shares commerce on a sub-1 price-to-earnings development (PEG) ratio of 0.9 and 0.5, respectively.
I consider this dividend and development share’s a fantastic inventory to contemplate for long-term traders. Over time, I reckon earnings will surge as a hovering inhabitants drives demand for extra houses.
