What’s your outlook for the U.S. housing market in 2024? If it’s bullish, then here’s an under-the-radar dividend grower to consider. Lennar (NYSE:LEN) isn’t a red-hot “Magnificent Seven” name, but the company’s stock went on a red-hot run last year. Still, even though I’m generally a contrarian investor, I am bullish on LEN stock and am preparing for more upside in the coming months.
Based in Florida, Lennar is a homebuilder that’s been around for more than half a century. You probably won’t see a lot of chatter about Lennar stock on financial media or social media, but that’s perfectly fine. It can be a hidden treasure in your portfolio if you decide you like the stock.
Plus, as we’ll discuss in a moment, it’s one of those treasures that keeps on providing value, especially for passive-income investors. So, let’s see if we can build a solid financial house from the ground up with LEN stock today.
Lennar Shows Respect for Its Shareholders
How can a company reward its loyal investors? One way is to pay out generous dividends and then increase the payments. Another way is to repurchase the company’s own stock shares. This reduces the pool of publicly available shares and may boost the stock price while also showing the company’s confidence in its future growth.
These are good signs that a company really respects its shareholders. As it turns out, Lennar is doing both of these things — increasing its dividend distributions and buying back the company’s own shares.
You can see on TipRanks‘ Dividends page for Lennar that the company has a history of increasing its quarterly dividend payouts. Just recently, Lennar’s board approved yet another quarterly dividend increase, from $0.375 per share ($1.50 per year) to $0.50 per share ($2 annually). Thus, if you’re a shareholder of record by January 24, you can take advantage of Lennar’s generosity.
Furthermore, Lennar’s board approved the repurchase of “up to an additional $5 billion in value” of the company’s own stock. Lennar Executive Chairman and Co-CEO Stuart Miller implied that the company’s dividends and share repurchases are sustainable, citing Lennar’s strong balance sheet and cash position.
Don’t Fret Over the LEN Stock Rally
Lennar stock rallied from $95 to $145 in 2023, and this might bother some value-conscious investors. I fully understand this concern, but there’s no need to worry when you consider all of the relevant facts.
After all, if a company has strong earnings, then a share price rally may be fully justified. Impressively, Lennar beat Wall Street’s consensus EPS forecasts in the previous four reported quarters.
Moreover, Lennar really knocked it out of the park in the fourth quarter of Fiscal Year 2023. The company earned $4.82 per share on revenue of $11 billion, thereby surpassing the consensus estimate of $4.59 per share on revenue of $10.2 billion.
Here’s the most encouraging part of Lennar’s quarterly report, though. Amazingly, the company’s new orders grew by 32% year-over-year to 17,366 homes, and the dollar value of Lennar’s new orders increased by 32% to $7.3 billion.
Think about what was going on last year in the housing market. The annual U.S. 30-year fixed mortgage interest rate topped out at around 8%. The American dream of homeownership seemed out of reach for many people because it was unaffordable.
Amid that distressing backdrop, some commentators prepared for an implosion of the U.S. housing market. Yet, Lennar forged ahead and rapidly grew its home orders. It’s not a miracle; it’s a solid business delivering outstanding results despite the odds against it.
Finally, if you’re still worried that LEN stock got too far ahead of itself, consider this. Lennar’s GAAP-measured trailing 12-month price-to-earnings (P/E) ratio is just 10.8x. That’s significantly lower than the sector median P/E ratio of 17.9x. So again, a seemingly high share price can be justified if a company’s earnings are robust.
Is Lennar Stock a Buy, According to Analysts?
On TipRanks, LEN comes in as a Moderate Buy based on 11 Buys, four Holds, and two Sell ratings assigned by analysts in the past three months. The average Lennar stock price target is $155.80, implying 1.6% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell LEN stock, the most accurate analyst covering the stock (on a one-year timeframe) is Matthew Bouley of Barclays (NYSE:BCS), with an average return of 32.80% per rating and an 83% success rate. Click on the image below to learn more.
Conclusion: Should You Consider Lennar Stock?
It’s a shame that many stock traders will probably never learn about Lennar. However, maybe this is a blessing in disguise since you have an opportunity to conduct your due diligence on a homebuilder hero that beat the odds last year with outstanding home-orders growth.
Additionally, Lennar continues to demonstrate respect for its loyal investors, and, in the final analysis, the company’s shares really aren’t overvalued. For all of these reasons, I am glad to consider LEN stock as an underappreciated overachiever for 2024.
