Dividend-growth stocks Berkeley Group Holdings plc & Imperial Brands plc seem the best bargains on the Footsie

Everybody loves a bargain, especially if they are blue-chip FTSE 100 dividend stocks with solid track records of payout and share price growth. London-focused housebuilder Berkeley Group Holdings(LSE: BKG) and global tobacco giant Imperial Brands(LSE: IMB) are both trading on P/E valuations of less than 10 times earnings. Tempted?

Planning palaver

Berkeley has got even cheaper this morning, its share price down 5.33% after today's trading statement confirming that it continues to trade in line with its business plan requirements and is confident of meeting longer-term profit guidance. However, it also declared itself "constrained by high transaction costs, the 4.5x income multiple limit on mortgage borrowing and prevailing economic uncertainty".

These factors are beyond its control, as is the Treasury's tougher tax regime for buy-to-let, and the UK's notoriously sluggish planning system, which have left it "currently unable to increase production beyond the business plan levels". This negative mindset has offset some good numbers, with the board reaffirming its guidance to deliver at least £3.3bn of pre-tax profits over the five years to 30 April 2021, and confirming its "resilient position, coupled with its well-located sites and strong balance sheet".

Cut price buy

It also remains on track with its shareholder return programme, which aims to return around a fifth of its market cap through a combination of share buybacks and special dividends by 2021. Despite today's drop Berkeley still trades 33% higher than a year ago, a better performance than many of its rivals and currently offers a forecast yield of 5.3%, covered 1.7 times.

That said, City analysts are predicting a 31% drop in earnings per share (EPS) in the year to 30 April 2019, and a further 7% the year after. After five consecutive years of double-digit growth, this is quite a reversal. Yet it still looks a buy to me trading at an absurdly cheap 8.39 times earnings. 

Imperial stretch

Imperial Brands is down a stunning 35% in the last year. Who said tobacco stocks were defensive? It took a further knock yesterday after being kicked off Goldman Sachs' Pan-Europe 'conviction list' due to its struggles to return to organic revenue growth. However, others still believe it could be a stunning growth stock.

The cigarette market is deteriorating generally, something every investor has to factor in, and Imperial Brands' attempts to consolidate, simplify and invest in its brand portfolio have not done enough to compensate. It could find salvation in next generation e-cigarette products, where it is strongly placed following the recent blu acquisition, although I wonder whether these will attract a clampdown at some point.

Smoke and fire

These worries are reflected in its bargain valuation, with the stock trading at just 9.93 times earnings on a forecast yield of 7.3%, with reasonable cover of 1.4. EPS growth is forecast to slip 2% in the year to 30 September, then increase by 4% over the next 12 months.

Imperial Brands is under a cloud right now but if you delay buying until after the turnaround, you might have missed a great opportunity. Today could prove a tempting entry point for brave, income-seeking contrarians.

Buy-And-Hold Investing

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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