Insider: directors buy into this massive dividend yield again

It’s one of the most generous dividend payers around, and bosses think the shares are still worth buying. There’s also activity among insiders at a former FTSE 100 star.

For a brief moment last Friday, Kwasi Kwarteng’s aggressive mini-budget put a rocket underneath Barratt Developments (LSE:BDEV) and the rest of the bombed out housebuilding sector, as investors bet the chancellor’s new stamp duty rules would provide a boost.

However, as with other rallies in 2022, it didn’t last, a 4% jump in share price quickly reversed, condemning the troubled stock to a finish in the red.

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Kwarteng has cut stamp duty tax payable on all property purchases. The threshold at which a buyer pays the tax has been doubled from £125,000 to £250,000, and first-time buyers won’t pay it on property prices under £425,000, up from £300,000 previously. Stamp duty relief will also now be available for first-time buyer homes up to £625,000 rather than £500,000.

But management remain puzzled by the strength of negativity surrounding Barratt and the wider sector. So baffled are they that on Friday the chairman and finance director snapped up shares worth £115,000 at prices available only a handful of times in the past eight years.

Chair John Allan added 12,000 shares to his stake at 413.85p each. That near-£50,000 purchase takes his total holding to over 94,000 shares worth in excess of £380,000.

Mike Scott, chief financial officer, doubled his stake when he paid £65,000 for 15,744 at 413p per share. He now owns 32,205 Barratt shares.

They’re not the first purchases since the company released annual results on 7 September. Non-executive director Katie Bickerstaffe spent £5,000 soon after the numbers, while Scott forked out almost £19,000 for 4,500 shares.

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Barratt’s results for the year to 30 June were more or less in line with expectations, and the share price is currently where it was just before the announcement.

Most of the damage done to Barratt happened in the first four months of the year, followed by another lurch lower over the summer. Investors believe that rising interest rates to combat sky-high inflation and fears of a recession will dampen demand for housing. Housebuilders are also fighting supply constraints and a sharp increase in costs.

All this considered, and with both margins and reservation trends already softening, some City analysts believe Barrat could struggle to hit even modest forecasts for flat gross profit in 2023.

However, supporters of the stock, including the company’s share-buying board, will reasonably point to the shortage of housing in the UK as a driver of demand for new homes. Prime Minister Liz Truss’s tax cutting agenda, aimed at driving economic growth, could also have a positive effect on home sales, although what it will do to interest rates and inflation remains to be seen.

Barratt shares trade on a price/book ratio of around 0.7, placing them among the cheapest in the sector. A prospective dividend yield of over 9% will also make the shares attractive to income seekers who believe the economy will not only have survived the winter, but be in good shape when the home buying season begins again in the spring.

Howden shares going cheap

It hasn’t been a great 2022 for Howden Joinery Group (LSE:HWDN) either. The kitchen supply business was only promoted to the FTSE 100 index in March, but lost its place last week, having been marked for demotion to the FTSE 250 index at the last quarterly reshuffle.

Howden’s share price peaked at just under £10 in September last year following a boom period for the DIY sector during the pandemic. But, like the housebuilders, it has spent most of this year in steady decline. Again, it’s all to do with fears about a cooling housing market as living costs rocket.

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But with its share price down 38% since the start of the year, and trading at a two-year low, the wife of chief executive Andrew Livingston, who was poached from Screwfix to replace founder and current CEO Matthew Ingle in 2018, has bought a stake in the business.

Christiane Livingston bought almost £33,000 of Howden shares for 558.8p each, two months after the company’s half-year results. Then, the business was trading well ahead of pre-Covid levels and sales were enjoying strong momentum.