The FTSE 250 has fallen by double-digit percentages since the beginning of the year. This means UK investors seeking value stocks have a great chance to pick up a bargain or two.
Things could remain tough for the broader FTSE 250 over the short-to-medium term. London second-tier stock index comprises a greater proportion of UK-focussed shares than, say, the more international FTSE 100. So forecasts that Britain will record zero growth in 2023 is a worrying omen.
However, things are not all bad. Many top dividend-paying stocks should still be in good shape to pay market-beating dividends, regardless of this turbulence.
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What’s more, 2022’s extreme share price weakness leaves many top FTSE 250 dividend stocks trading on super-low valuations. Bellway (LSE: BWY) is one rock-solid value stock I’d buy right now.
Record sales
Rising interest rates pose a threat to housebuilders as they put stress on buyer affordability. But, so far, these battered stocks have remained resilient despite constant Bank of England (BoE) action. And this fills me with confidence.
Bellway’s latest financial update underlines the underlying strength of the industry. On Tuesday it said that revenues rose 13% in the 12 months to July. They hit a record £3.5bn for the period.
Completions meanwhile rose 10.5% year-on-year to an all-time high of 11,198 homes. And the closing order book comprised of 7,223 homes, up from 7,082 previously, and with a value of £2.1bn.
Bellway has ambitious plans to make the most of these favourable trading conditions too. It remains on track to complete on 12,200 homes in the current financial year in a further boost to earnings.
Market fundamentals
As an investor, I think housebuilders like Bellway are packed with potential. Lacklustre housing policy in recent decades has left a massive shortage of available homes. And there is currently no sign supply is suddenly set to improve.
At the same time, lending conditions for new homebuyers remain ultra supportive.
As I said earlier, rates are rising and costs for property owners are increasing. But intense competition among Britain’s mortgage providers means home loan costs remain below historical norms. And they are likely to come down again if, as expected, the BoE begins cutting interest rates in 2023.
What’s more, the Deposit Unlock government incentive scheme should support demand for Bellway’s homes despite the end of Help to Buy next March. This scheme allows first-time buyers and home movers to buy a new-build with just a 5% deposit.
Stunning all-round value
Bellway share price has collapsed around 27% in 2022. It’s a fall much larger than the broader FTSE 250. And it leaves the company trading on a forward P/E ratio of just 6.1 times.
This low reading, combined with the company’s 6% dividend yield, makes it a top value stock, in my opinion. I’d buy it today to watch it soar in value as market confidence returns.
