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Looking for the hottest dividend growth shares to buy? Here’s one I think demands serious attention following upbeat trading results on Tuesday (12 August).
Fast-rising dividends
Falling home sales have had a devastating impact on some housebuilders’ dividends in recent times. Take Bellway (LSE:BWY) of the FTSE 250 — it froze dividends in the financial year to July 2024, at 140p per share. And it slashed them to 54p the year after.
The good news is that City analysts expect industry-wide dividends to rise from here as homebuyer demand rebounds. At Bellway, they’re expecting shareholder payouts to grow rapidly over the short to medium term, as shown below:
| Financial Year Ending July… | Dividend per share | Dividend growth | Dividend yield |
|---|---|---|---|
| 2025 | 65.4p | 21% | 2.6% |
| 2026 | 78p | 19% | 3.1% |
| 2027 | 93.9p | 20% | 3.8% |
Latest trading news from the company today illustrates why brokers are perhaps right to be so confident.
For the 12 months to 31 July, Bellway’s total completions rose 14.3% to 8,479 homes, while average selling prices nudged up to £316,000 from £307,909. Both figures came in ahead of expectations.
Revenues were up 17% at £2.8bn, while the underlying operating margin rose 1% to 11%. This led Bellway to predict “strong profits growth” for the period.
Looking ahead, a strong order book underpins hopes of further improvement in financial 2026. This consisted of 5,307 homes as of 31 July, up from 5,144 the year before, and with a higher value of £1.5bn versus £1.4bn previously.
Robust forecasts
There are still risks to its recovery, of course. An inflationary spike could curb Bank of England rate cuts, hitting buyer affordability. A stagnant economy and rising unemployment could also hit sales volumes and selling prices.
However, I believe the builder can meet those upbeat dividend forecasts, even if market conditions turn choppier.
For financial 2026 and 2027, profits are tipped to rise 15% and 21%, respectively. This means predicted dividends are covered 2.4-2.5 times by projected earnings.
You’ll know that any reading above two times is said to provide a wide margin of safety.
Furthermore, dividend forecasts are supported by the company’s improving balance sheet. It swung to a net cash position of £42m as of 31 July from net debt of £10.5m at the same point in 2024.
Higher completions, moderating build cost inflation, and improving capital discipline should continue to support cash generation going forwards.
A cheap dividend share
Bellway is confident of building 9,200 homes this financial year, up roughly 450 year on year. I believe the builder’s in good shape to meet this target, supported by further interest rate declines and by its robust landbank.
There are risks here, but I think this is reflected by the firm’s low valuation. For both financial 2026 and 2027, Bellway shares trade on a sub-1 price-to-earnings growth (PEG) ratio of 0.9 and 0.5, respectively.
I believe this dividend and growth share’s a great stock to consider for long-term investors. Over time, I reckon profits will surge as a soaring population drives demand for more homes.
