Three More Stocks to Play the Housing Recovery – Without Owning a Homebuilder

With homebuilder stocks all ramped up amid buzz of a possible new burst of housing construction, value investors might want to look elsewhere for a piece of recovery action. Here’s a look at companies in other industries that stand to gain on a housing boom but, unlike homebuilders, profit from divisions that don’t require a lot of new mortgages. They could make very nice consolation prizes if this whole recovery thing doesn’t go as planned.

Knee-jerk picks for sort-of, not-really, housing play stocks would be home improvement stores Home Depot (HD) or Lowe’s (LOW). But others already thought of that, and now the shares trade at valuations near five-year highs.

Home Depot PE Ratio Chart by YCharts

So we looked for a few less obvious possibilities. YCharts Pro rates each of the following companies as strong fundamentally and gives them average or better grades for share price valuation. Better yet, all of them pay respectable dividends.

Leggett & Platt (LEG)

Leggett & Platt runs four divisions, and only one has much interest in a housing recovery. Sales of components used in mattresses and furniture are still key to profits, but among its many other products are vehicle racks, steel wires and barricades used when rivers rise. It just bought a company that makes welded tubing for the aerospace industry.

The company is on a mission to boost shareholder returns, and to that end, the dividend yield is now over 4.7% and is generally covered by earnings.

Leggett & Platt Dividend Chart by YCharts

Whirlpool (WHR)

Whirlpool, maker of the world’s washers, refrigerators and other appliances, missed its earnings forecast by a big margin recently and reported that its previously strong cash flow had turned negative. The company blamed weak worldwide economies and higher prices while investors sold.

But go back a year, and there’s evidence that Whirlpool can do well even when the housing market isn’t helping.

Whirlpool Corporation EBITDA TTM Chart by YCharts

Whirlpool has an underfunded pension that the charts can’t see. But the shares’ dividend currently yields about 3.7%.

Williams-Sonoma (WSM)

Williams-Sonoma’s high-end linens and kitchen stuff would surely sell faster if more people were moving into houses with more bedrooms and bigger kitchens to furnish. But for the past couple of years, the company has done great for its own books as well as investors even with non-existent home sales. That’s a 300%-plus gain in the share price in the past two years.

Williams-Sonoma Stock Chart by YCharts

The share price got knocked back earlier this month when the company admitted that recent discounting had hurt profits. That didn’t stop the company from upping the dividend to what’s now a 2.5% yield. The share price fall now values the company at about 16.5 times earnings, a more reasonable place than the 20-plus ratio where Williams-Sonoma shares more often live.

Dee Gill is an editor for the YCharts Pro Investor Service which includes professional stock charts, stock ratings and portfolio strategies.