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As I have been happy to point out in days gone by, having exposure to a so-called safe-haven asset like a precious metal should be a prerequisite for investors in today’s climate.
Buying up the underlying commodity itself may seem an unappealing prospect for many however, as your gold bars (if that’s your tipple) won’t pay dividends and will just sit in a vault or your safe at home looking pretty.
Buying into one of London’s listed gold producers is a way to get around this and Polymetal International (LSE: POLY) is a solid bet for those looking to protect their portfolios should risk appetite across the investment community turn south.
Last time I covered the FTSE 250 share I mentioned the output-boosting measures it is taking to keep earnings chugging higher. And its bright earnings outlook — profits rises of 5% and 31% are forecast for 2018 and 2019 respectively by City brokers — is reinforced by strong demand for gold at the moment.
Latest World Gold Council data showed global gold-backed exchange traded funds adding 15 tonnes of gold during May, taking the total to 2,484 tonnes. Perky buying in Europe and Asia drove inflows higher again and, given the broad range of political and economic considerations unnerving investors today (from the consequences of Brexit to fears about overheated stock markets), I see no reason for yellow metal demand to subside any time soon.
Unsurprisingly, the solid earnings picture over at Polymetal feeds through to expectations that dividends will keep growing at an impressive rate too. Last year’s reward of 44 US cents per share is anticipated to advance to 45 cents in the current period (or so say the number crunchers), before detonating to 60 cents next year.
As a consequence, yields at the gold digger stand at 5.1% and 6.8% for 2018 and 2019 respectively. When you throw a dirt-cheap forward P/E ratio of 9.5 times into the equation as well, I reckon Polymetal is a hard stock to overlook right now.
Countryside Properties (LSE: CSP) is another FTSE 250 share which investors are not exactly banging the doors down to buy, but which is one that I’d happily buy and hang onto for many years to come.
I’m not for one second suggesting that the British housing market isn’t on the defensive right now. But, while the devilish growth in property prices seen over recent decades may have gone the way of the dodo, average home values certainly aren’t falling off a cliff as many had predicted in the event of our now-cooling domestic economy.
Indeed, latest Halifax data actually showed prices bouncing back into expansion in May with a 1.5% rise. While there may be some month-on-month bumpiness along the way, the chronic UK housing shortage created by a rising population and insufficient build rates should keep prices broadly on an upward slope.
Countryside itself commented in May that although its own average selling prices ducked to £392,000 during October-March from £441,000 a year earlier, a 15% rise in the number of completions, to 1,655 homes, helped keep the top line swelling during the period.
Adjusted revenue rose 7% in the half-year to £468m, and this drove adjusted operating profit 14% higher to £80.6m. The great news for income hunters was that the strong result prompted the firm to hike the interim dividend 24% to 4.2p per share.
With the supply/demand shortage in the UK set to keep driving demand for Countryside’s increasing number of new-builds, it should come as little surprise that City brokers are predicting both profits and dividends to continue marching skywards too.
Helped by an anticipated 26% earnings improvement in the year to September 2018, Countryside is expected to lift the full-year dividend to 10.8p from 8.4p last year. The good news doesn’t end here either as, supported by forecasts of a 21% profits leap in fiscal 2019, the total reward is expected to jump to 13.2p.
Dividend yields of 2.9% and 3.6% may be decent rather than spectacular, but I believe Countryside’s bright earnings prospects and rapidly-improving balance sheet make it a great pick for those seeking strong and sustained dividend growth. What’s more, a prospective P/E ratio of 10.6 times seals the deal and underlines the builder as a brilliant bargain at today’s share price.
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