Small-Cap Stock Meritage Homes Ticks A Lot Of Boxes

(MENAFN- Yolo Wire) Small-cap stock Meritage Homes (NYSE: $MTH) could be a good way to play a rebound in the U.S. housing market.

While its market capitalization is only $4.75 billion U.S. and it isn't a household name, Meritage Homes is actually the fifth largest home builder in the U.S.

Based in Scottsdale, Arizona and a going concern since 1985, Meritage specializes in building single-family detached homes. It has a presence in 12 U.S. states and has 1,500 employees.

The housing market has struggled since the end of the Covid-19 pandemic in 2022 as interest rates rose sharply to combat inflation.

However, there are signs that the U.S. housing market is beginning to turn a corner.

The latest data shows that existing home sales in the U.S. rose 3.2% in May from a year earlier. The median price of an existing home sold in May climbed 1.3% higher to $429,300 U.S.

Despite the volatility, Meritage Homes' stock has proven to be a steady performer, rising 10% over the last 12 months while many larger homebuilders saw their share prices sink.

MTH stock also looks inexpensive, trading at just 13 times this year's earnings estimates, which is far below the 22 price-to-earnings ratio among stocks in the S&P 500 index.

And Meritage Homes offers a decent dividend to its shareholders. The company currently pays a quarterly distribution of $0.48 U.S. per share, giving it a respectable yield of 2.67%.

There are also rumours that Meritage Homes could become a takeover target as acquisitions in the U.S. housing market heat up.

Berkshire Hathaway (NYSE: $BRK.B) recently announced that it is buying homebuilder Taylor Morrison Home (NYSE: $TMHC) for $6.8 billion U.S.

The purchase of Taylor Morrison Home has raised expectations of more consolidation within the U.S. housing market.

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