Before the most recent federal election kicked off, I’d suggested that investors keep their eyes on the housing sector. This is where many of the candidates were keeping their focus.
The Liberals went on to secure a minority government, so we will see how a fractured parliament will tackle what many of the major parties were labelling an affordability crisis.
For those who are in the market, housing has roared back in a big way in the second half of 2019. Prices are on the upswing, and sales have bounced back in major metropolitan areas like the Greater Toronto Area.
High demand and low supply have underpinned prices for years now, and there are few signs that this will stop. The Canada Mortgage and Housing Corporation (CMHC) revealed that the pace of housing starts slowed in the month of September, falling 2.5% month over month.
Newcomers to Canada have accounted for nearly a fifth of the housing market, according to a recent survey from Royal Lepage. The poll showed that immigrants are slated to buy more than 20% of houses over the next five years.
With supply remaining at low levels, Canada’s high immigration rate will sustain a level of demand that should keep the housing market in a healthy state.
Today I want to look at one housing-linked dividend stock that is set to release its third quarter 2019 results tomorrow. I still love this stock late in the year.
Genworth in focus before earnings
Genworth MI Canada (TSX:MIC) is an Oakville-based private residential insurer. Shares have climbed 41% in 2019 as of mid-afternoon trading on October 29. The stock has achieved average annual returns of 10% over the past five years. The company is set to release its third-quarter results before markets open on October 30.
In the second quarter, Genworth reported 13% quarter-over-quarter growth in net income while transactional premiums written and total premiums written shot up 86% and 85%, respectively.
Both were also up 12% and 14%, respectively, from the prior year. New insurance written rose $0.6 billion year-over-year, representing 12% growth. The company credited increased housing market activity for this increase. This is a positive sign going forward.
Genworth last announced a quarterly dividend of $0.51 per share, representing a 3.8% yield. The company has delivered dividend-growth for 10 consecutive years. Shareholders were also treated with a special dividend payout of $1.45 per common share paid out on October 11.
Shares of Genworth had a price-to-earnings ratio of 11.4 at the time of this writing. It also had a price-to-book value of 1.1, putting it in solid territory relative to its peers even as it nears its 52-week high.
The stock did have an RSI of 62 as of mid-afternoon trading on October 29, putting it just outside of technically overbought territory. Nonetheless, I continue to like Genworth in a housing market that has returned to form.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned.