Water stocks such as United Utilities Group (LSE: UU) are often popular when economic conditions worsen. The essential nature of the firm’s services — and the exceptional profits visibility that this provides — make this high-dividend stock and its peers a popular lifeboat when things look scary.
That’s not to say that utilities firms are without risk. This particular FTSE 100 business fell this week as Ofwat announced it was expanding an investigation into the dumping of sewage into rivers.
Okay, the regulator’s probe hasn’t currently got United Utilities in the crosshairs, announcing South West Water will be investigated. However, there is some concern other operators could be pulled in and subjected to huge fines.
No share is without risk, of course. And in the case of United Utilities I think the benefits of owning the business outweigh the dangers. Ultra-defensive stocks like these are worth their weight in gold at times like these.
Oh, and today the company’s forward dividend yield sits at a fatty 4.4%.
Housing hero
Springfield Properties (LSE: SPR) offers the sort of all-round value that also makes it a top buy for July. For this financial year, its dividend yield sits at an excellent 5.2%. And on top of this the housebuilder trades on a forward price-to-earnings (P/E) ratio of just 6.7 times.
Any investor in Springfield needs to consider the impact that Bank of England (BoE) rate rises will have on future profits. Accelerating inflation means rates could keep increasing rapidly in what could be a blow to homebuyer demand.
However, I believe this threat is more than reflected in the Scottish homebuilder’s ultra-low valuation. It’s also my opinion that sales of newbuild properties will remain rock-solid as historically-low mortgage rates — helped by intense competition among Britain’s lenders — appear here to stay.
I also believe the end of Help to Buy next March won’t be a catastrophe for housing stocks like Springfield. New government schemes to keep buyer deposits on the low side has already been launched. Besides, potential homeowners can still use a Lifetime ISA, a product that provides the same advantages as Help to Buy.
Brick bonanza
Ibstock (LSE: IBST) is a big-yielding dividend stock I already own. I’m tempted to buy more in July too, given its exceptional all-round value.
Ibstock makes bricks so, like Springfield, it’s also vulnerable by BoE rate rises. A cooling housing market will naturally hit demand for its product. What’s more, it takes a lot of energy to make a brick so the business is under threat from soaring energy costs.
Still, it’s my opinion that the benefits of owning this FTSE 250 share offset the dangers. Britain will need to get building frantically over the next decade and more to meet demand. The National Housing Federation thinks 340,000 new homes are needed each year in England alone.
Ibstock is obviously well-placed to exploit this massive market opportunity. Yet I don’t think this is reflected by the company’s low share price. Today, it trades on a forward P/E ratio of 10.2 times. It also carries a 5.2% dividend yield at current prices.
