I am hunting for the best UK shares to boost my returns now and over the long term. One stock I like the look of is Springfield Properties (LSE:SPR). Here’s why.
Scottish house builder
As a quick introduction, Springfield is one of the leading house builders in Scotland. Founded in the 1990s, the business has grown impressively in the past 30 years and claims to have doubled in size every five years.
So what’s happening with Springfield shares currently? Well, as I write, they’re trading for 133p. At this time last year, the stock was trading for 156p, which is a 14% decline over a 12-month period.
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It is worth noting that many UK shares have pulled back in the last few months due to macroeconomic factors as well as the tragic events in Ukraine. For that reason, Springfield’s share price drop does not concern me.
UK shares have risks
Despite my bullish outlook on Springfield, I must note tangible risks to growth and returns. Firstly, soaring inflation, the rising cost of raw materials, and the supply chain crisis have had a material impact on Springfield and all house builders. Rising costs are squeezing profit margins which underpin performance, growth, and returns. The supply chain crisis could see operations affected too.
Next, rising interest rates in the UK could hamper shorter-term demand for homes in the UK as prices rise. This price rise in the market could affect sales. However, I do think this is a short-term issue, linked to the current economic climate in the UK.
Why I like Springfield shares
So to the positives then. Firstly, I believe Springfield has excellent growth prospects ahead. This is linked to the fact there is a huge gap between the supply and demand for homes in the UK. Due to demand outstripping supply, house builders are in a unique position to benefit, which could boost performance and shareholder returns in the longer term.
At current levels, Springfield shares look good value for money on a price-to-earnings ratio of just 11. The general consensus is that UK shares with a ratio below 15 represent value for money.
Next, Springfield has an encouraging track record of performance. I do understand that past performance is not a guarantee of the future, however. Prior to the pandemic, Springfield consistently grew revenue and profit. Trading in 2020 was affected by the pandemic. Revenue and gross profit in 2021 surpassed pre-pandemic levels. Despite current economic issues, I expect this upward trend to continue.
Finally, consistent positive performance comes hand-in-hand with shareholder returns. Springfield shares’ current dividend yield stands at over 4.5%. It is worth noting that the FTSE 100 average yield is 3%-4%. Dividends can be cancelled at any time at the discretion of the business, however.
Overall I like the look of Springfield shares and would buy them for my holdings. I believe the business will continue on its impressive growth journey and it already boosts passive income through dividends. I’d expect this to continue for the long term too.
My confidence in Springfield’s growth prospects stems from the current state of the housing market. Finally, there are other UK shares in the house building market that will likely experience a similar fate, in my opinion, such as FTSE 100 giant Persimmon.
