I’m searching for the best, cheap FTSE 250 stocks to buy for my stocks portfolio next month. I think these two big-dividend-paying bargains could be too good to miss.
Many of Britain’s housebuilders like Vistry Group (LSE: VTY) have fallen sharply since the beginning of 2022. It’s a decline that seems to be at odds with a stream of positive updates on the state of the housing market. Latest Office for National Statistics data this week, for instance, showed property prices rose an extra 9.6% year-on-year in January.
The market is nervous that interest rates could hit demand for newbuilds created by Vistry and its peers. With inflation soaring, it’s certainly possible that the Bank of England could ramp up monetary tightening in the months ahead. And this might hit buyer affordability hard.
This is a risk I believe is baked into Vistry’s share price today however. Today, the FTSE 250 share trades on a forward price-to-earnings (P/E) ratio of just 7 times, a reading that sits well inside bargain basement terrain of 10 times and below.
7.6% dividend yields
I actually reckon Vistry’s sales will remain strong, owing to a lack of existing properties entering the market today. At the same time, intense competition among mortgage providers is heating up and government support from first-time buyers through Help to Buy remains in play.
I’m confident that other support for new homebuyers (like the mortgage guarantee scheme requiring just a 5% deposit) will significantly offset the withdrawal of Help to Buy next year too, and support robust sales of newly-constructed homes.
One further point about Vistry. The builder doesn’t just offer excellent value from an earnings perspective. Its 7.6% dividend yield for 2022 smashes the 2.6% FTSE 100 average.
With predicted dividends covered a healthy 1.9 times by anticipated earnings — and the company’s balance sheet recovering strongly (it had £234.5m worth of net cash as of December — I think Vistry’s in great shape to make good on these predictions too.
Another FTSE 250 bargain
A bright outlook for the homes market is also making me pay close attention to Ibstock (LSE: IBST). Like Vistry, this FTSE 250 share has also slipped sharply in value in recent months and, as an existing shareholder, I’m thinking of using this as a classic dip-buying opportunity.
You see Ibstock makes the bricks that are essential to help solve the chronic shortage of new homes. The government is looking to build 300,000 new residential properties every year and this building materials provider plans to supercharge capacity to let it exploit this upcoming building boom to the max.
Recent share price weakness means that Ibstock trades on a forward P/E ratio of just 10.8 times. It also sports a mighty 4.8% dividend yield, with expected payouts covered a healthy 1.9 times by anticipated earnings too.
I’d buy the FTSE 250 business even though possible problems with building its new factory could hit medium-term profits.
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Royston Wild owns Ibstock. The Motley Fool UK has recommended Ibstock. 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.