3 reasons to buy Brickworks Limited

Brickworks Limited (ASX:BKW) reported a strong set of interim results and the outlook is positive for the remainder of the year.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Brickworks Limited (ASX: BKW) offers shareholders exposure to a booming housing industry that looks to have plenty of room left to run.

Operating on a 31 July financial year, Brickworks reported a strong set of results for the half year ended 31 January 2015. Here's a recap: Normalised net profit after tax jumped 17.6% to $62.8 million and earnings per share soared by 17.5% to 42.2 cents per share (cps). The strong result was achieved on record sales revenue in the key building products division which experienced growth of 15% to $340.6 million

1. Positive outlook and solid momentum

For the six months to December the Australian housing market continued to grow at double-digit rates. Detached housing commencements grew 13.5% to 59,059 and other residential commencements grew 12.8% to 38,788. Brickworks' management described this level of activity as "the highest on record."

The latest figures from the Australian Bureau of Statistics suggest the housing market remains strong with approvals running at elevated levels. Importantly for building material suppliers such as Brickworks, many of these approvals are yet to become housing starts which suggest there is still plenty of momentum to come for the sector.

2. Dividends

In financial year 2014 the group paid out a total dividend of 42 cps. At the most recent half an interim dividend of 15 cps was paid which was an increase of 1 cps on the prior corresponding period.

Brickworks has an impressive history of paying out a rising level of dividends with the pay-out steadily growing from 31 cps back in 2005 to a forecast (according to Thomson Consensus Estimates) of 47.9 cps this year.

3. Defensive

It's a good idea to consider the downside risk of an investment and not just focus on the upside potential; on this score shareholders in Brickworks are well served. In a similar vein to Wesfarmers Ltd (ASX: WES), Brickworks can be considered a conglomerate which means it enjoys numerous sources of unrelated income. This diversity comes not just from the property operations which are an adjunct to the brick making business, but particularly from its significant shareholding in Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »