Why I’d buy dividend stocks Taylor Wimpey plc and St James’s Place plc with £3,000 today

Strong businesses back the big dividends at Taylor Wimpey plc (LON: TW) and St James’s Place plc (LON: STJ).

| 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.

Today’s full-year report from housebuilder Taylor Wimpey (LSE: TW) shows the underlying business is in good health. Revenue rose almost 8% in 2017 compared to the year before, adjusted operating profit lifted a little over 10%, and net cash on the balance sheet swelled by around 40% to almost £512m.

The company earned just over 3% of its operating profit from its small business in Spain but the rest came from activities in the UK, making the firm a good barometer of the health of the British housing market. 2018 has started well and the directors are encouraged by solid levels of demand coming into the spring selling season.” They reckon the fundamentals are strong for new housing in the UK and customer confidence is high, driven by a competitive mortgage market, low interest rates, and the government’s Help-To-Buy scheme.

Dividends through the cycle

But the stock fell around 4% in early trading today and has made little progress since hitting a peak just above 190p in August 2015, despite the underlying business scoring ongoing annual advances in earnings and revenue. I think the market is discounting the firm’s progress by compressing the valuation because of the sector’s cyclicality — the market expects revenues and profits to cycle down again at some point and it’s ‘thinking’ ahead to allow for that.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

The directors said in the report: “We are committed to providing a reliable dividend stream for our investors through the cycle.” The firm plans to pay an ordinary dividend annually, “including through a ‘normal’ downturn”, with special dividends being paid at “appropriate times in the cycle.”  

This year, there’s a special dividend of 10.4p per share, which combines with an ordinary dividend of 4.9p to make a total of 15.3p, up almost 11% on what investors received in dividends during 2017. Today’s share price of around 190p throws up a forward dividend yield of just over 8%, which is attractive if you remain mindful of the cyclical risks.

Brisk trading

Meanwhile, wealth manager St James’s Place (LSE: STJ) issued its full-year results report today under the headline ‘Record Business Performance Supports 30% Increase In Full-Year Dividend’. So it’s safe to assume that things are going well.

Indeed during 2017, funds under management increased a little over 20% to almost £91bn from which the firm made underlying cash earnings per share up 40% on the year before. Chief executive Andrew Croft is optimistic about the future and believes the firm’s core market will grow further, “driven by favourable demographic trends and the accumulation of investable assets as savers take on the responsibility for providing for their own well-being in retirement.”

It’s hard to argue with the trend of the ‘wealthy becoming wealthier’ that we’ve seen over recent years, so I reckon St James’s place is operating in a market with a tailwind. At today’s share price around 1,163p, the forward price-to-earnings ratio for 2019 comes out at just over 19 and the forward dividend yield runs around 4.7%. I think the stock is worth digging into with your research.

This AI stock is becoming a digital juggernaut in a £ 12.5 billion market!

🤖 Curious about the next big player in AI? 🤖

Our leading industry analysts have uncovered a trailblazing content platform that's revolutionising the industry with its unparalleled generative AI technology, setting new standards in creativity and efficiency.

Care for a sneak peek?

Trusted by global giants like Amazon, Disney, and Netflix, this innovative company is not just transforming digital media with AI-generated 3D content but is also capturing a significant share of a £12.7 billion market!

With a remarkable 62% gross margin, indicating exceptional profitability and operational efficiency, this company's growth trajectory positions it as a must-watch for savvy investors.

Best of all, we're offering exclusive access to the name of this game-changing stock, absolutely free!

Discover your free AI stock pick

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

Investing Articles

At $184, I reckon this S&P 500 juggernaut is still on sale

Our writer sees Amazon (NASDAQ:AMZN) as an attractive S&P 500 stock to consider while it is priced 23% lower than…

Read more »

Investing Articles

Cheap FTSE 250 shares to consider buying right now?

These FTSE 250 growth stocks had weak starts to 2025, and face short-term uncertainty. But their long-term valuations could be…

Read more »

Investing Articles

As stocks dive, is this a rare chance for ISA investors to build generational wealth?

Globally, stocks have pulled back significantly following the announcement of tariffs by the US president. Is this an opportunity for…

Read more »

Investing Articles

2 ultra-cheap shares to consider right now!

These cheap UK shares offer considerable growth and income potential over the long term, reckons our writer Royston Wild.

Read more »

Investing Articles

Legal & General Group shares go ex-dividend on 24 April – time to grab that 9% yield?

Harvey Jones holds Legal & General Group shares and is already looking forward to the next bumper dividend from this…

Read more »

Young female analyst working at her desk in the office
Investing Articles

3 FTSE 100 dividend stocks to consider buying while they’re on sale

Paul Summers reckons canny investors should think about snapping up quality, dividend-paying stocks while they're going cheap

Read more »

Investing Articles

2 cheap passive income shares to consider buying right now

The passive income we can earn from the UK stock market looks set to climb this year, and could even…

Read more »

Investing Articles

Down 15% in a month, this FTSE 100 dividend share offers investors a stunning 10.8% yield

Harvey Jones plucks out a FTSE 100 dividend share that offers frankly a quite staggering yield and is now a…

Read more »