- Bellway launches £150 million share buyback and increases its dividend
- Housebuilder sticks to target for completions in new financial year
- House price increases expected to moderate in coming 12 months
- Inventory and land bank mean company is poised to benefit from any wider housing market upturn
“Bellway’s new capital allocation policy had been well flagged by management, but investors are warming to it all the same, as the housebuilder both increases its annual dividend and launches a £150 million share buyback scheme for the coming year,” says AJ Bell investment director Russ Mould.
“A strong balance sheet supports this largesse, whereby the buyback and forecast dividends for the year to July 2026 equate to nearly 8% of the company’s stock market capitalisation, and increased profits would help, too.
Source: Company accounts, Marketscreener, consensus analysts’ forecasts
“This is all a long way from the dividend cut of two years ago and suggests that chief executive Jason Honeyman and the team are looking forward with at least some degree of optimism, even if the new financial year is showing a broadly flat net private reservation rate per sales outlet compared to the July-to-October period of 2024.
“Mr Honeyman and team still expect Bellway to increase completions by some 5% in the coming financial year, to around 9,200, with a 1% advance in average selling prices to £320,000 on top.
Source: Company accounts, Marketscreener, management guidance for 2026E, consensus analysts' forecasts
“Management’s expectation that the underlying operating margin will stay flat at 11% in the 12 months to July 2026, excluding items such as cladding remediation costs and settlements with the Competition and Markets Authority, suggest that the volume gain and modest price increase will be enough to offset input cost inflation. Bellway’s own efficiency progress and a clear amelioration in input cost increases are both helping here, and the Bank of England, for one, will be pleased to see the builder flag ‘modest overall cost inflation for new tenders.’
Source: Company accounts, Marketscreener, consensus analysts' forecasts
“A wider cooling in company cost pressures could leave the Monetary Policy Committee with scope to push through further interest rate cuts, something that could also help to boost mortgage demand and the housing market.
“Bellway is certainly primed to benefit from any such upturn in demand, as it continues to run with a lofty inventory on its balance sheet. The year-end value here was £4.8 billion as of July, and that equated to 748 days’ sales. That is down a touch from the prior year but still elevated by the standards of the past decade or so. Improved sell-through and completion volumes would help Bellway to liquidate that inventory and release cash to generate the funds that can be used to invest in the land bank and the company’s competitive position and – once that is done – fund dividends and share buyback programmes.
Source: Company accounts
“The share price still seems sceptical as to the pace and extent of any upturn, in some ways understandably given how the boom times of the late 2010s, fuelled by the Help-to-Buy scheme and near-zero interest rates, seem unlikely to return any time soon.
“Nevertheless, Bellway’s shares do trade below one times historic tangible net asset, or book, value per share. In this respect, investors can argue they are currently buying £1 of the company’s assets for 88p a share, providing they are confident in the underlying value of those assets.
Source: Company accounts, Marketscreener, consensus analysts’ forecasts
“The old rule of thumb of builders (and indeed many cyclical industries) is that one times book or below may represent some value, in the event of an eventual upturn in sales, profits and cash flow, while two times and above may look expensive, especially if there is an unexpected downturn.”
