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Could this 5% dividend yield help ISA investors get rich and retire early?

Royston Wild
A person holding onto a fan of twenty pound notes

As a holder of shares in some of Britain’s biggest housebuilders, I’m confident that my ISA will witness some some scintillating returns from some big-dividend-paying stocks in the years ahead. The country has a whopping homes shortage, with attractive mortgage products (underpinned by low interest rates) and the Help to Buy scheme keeping purchasing demand ticking along nicely.

Government has talked the talk in terms of addressing the shortage but is yet to walk the walk. And fresh construction data from the Ministry of Housing, Communities and Local Government shows just how badly policymakers are failing, revealing that there were 241,130 new homes — whether through new constructions or property conversions — supplied to the market in 2018/19.

This may have been up 9% year-on-year and the highest level for almost 30 years, but it is a figure which still lags Whitehall targets by some distance. Politicians have acknowledged that Britain needs to build around 300,000 new homes by the middle of the next decade, yet only 213,660 of these brand-new abodes were built in the last year.

Big dividends at low cost

So far government has shown little appetite to hack back the colossal amounts of red tape to supercharge new-build production rates, and with Brexit threatening to keep dominating policy time well into 2020 (and probably beyond) I for one have little hope of significant action on this front any time soon. And one great way to play this inertia is by buying shares in Countryside Properties (LSE: CSP).

It’s no surprise to see the FTSE 250 firm’s share price swell 25% in the past three months alone to current levels around 360p per share, an ascent supported by Britain dodging the no-deal Brexit bullet at the end of October. Yet despite these gains, Countryside still looks relatively undervalued, the firm sporting a forward P/E ratio of 8.6 times — inside the bargain-benchmark region of 10 times and below — as well as a monster 4.9% dividend yield.

Picking up momentum

And the release of full-year results next week (November 21 to be exact) could provide the homebuilder with the scope for fresh share price rises. The business certainly impressed last time it updated in July with news that its weekly net reservation rate (per outlet) was up 12% at 1 between April and June, while its forward order book was up by an even-better 17% at £1.14bn. What’s more, a stream of positive updates from across the housebuilding sector since then convinces me that another solid update is in the offing.

City analysts expect earnings growth at Countryside to improve despite the impact of Brexit on the broader housing market, an 8% rise for the fiscal year to September 2019 being expected to improve to 10% for the current period, helped by the firm’s aim to supercharge build rates. I consider Countryside one of those rock-solid shares that could help you make a fortune in the years ahead.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Motley Fool UK 2019