Interactive Investor

ii view: a housebuilding giant with 7%-plus dividend yield

16th July 2021 15:25

Keith Bowman from interactive investor

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Up more than 80% since pandemic 2020 lows, we assess prospects for this £9 billion company. 

First-half trading update to 30 June

  • Revenue up 55% to £1.84 billion
  • New home legal completions up 55% to 7,406

Chief executive Dave Jenkinson said:

"Persimmon performed well during the first half of the year delivering new home sales completions approaching the levels achieved in the first half of 2019. 

 "Customer demand for our new homes has been strong right across the UK with healthy sales reservation rates through the period. The Group has an excellent forward order book at the end of June of £1.82 billion.

 "In supporting the Group's high quality growth we are taking advantage of attractive land investment opportunities and successfully brought over 10,000 new plots into the business across 48 locations in the period. Persimmon is well placed for the future with a strong balance sheet and healthy liquidity."

ii round-up:

Persimmon (LSE:PSN) is headquartered in York and operates from 31 regional offices throughout the UK. 

Its brand names are Persimmon Homes, Charles Church and Westbury Partnerships. 

It employs over 5000 people and completed 13,575 new homes in 2020.

For a round-up of this latest trading update, please click here

ii view:

With a stock market value of over £9 billion, Persimmon is the largest housebuilder listed on the UK market. An average selling price over the first half to the end of June of £236,200 is up from £225,066 in 2020. Around half of its private new homes are sold to first-time buyers. It expects to operate an average of 300 sales outlets through the current year. Like many rivals, Persimmon has also been returning excess capital to shareholders over recent years, although in Persimmon’s case, returns had been halted given the uncertainty of the pandemic, but now recommenced. 

For investors, economic outlook uncertainty resulting from the pandemic cannot be overlooked. Unemployment could rise and UK government finances are now arguably stretched given the size of Covid financial assistance paid out. The full impact of government steps already taken to rein in buyer assistance may not have fully washed through. 

But this latest update outlines a strong recovery from construction stoppages caused by the first pandemic lockdown in 2020. Forward sales are strong, group cash held stands at over £1 billion and housing market data remains robust. Dividend payments were previously restarted, and the shares now sit on a historic and estimated forward dividend yield of over 7%. In all, given strong housing market fundamentals and an attractive dividend yield, the shares look to offer appeal to higher risk income seekers.

Positives

  • Cash held of over £1 billion
  • Attractive dividend payment (not guaranteed)

Negatives

  • Economic outlook uncertainty
  • Previously halt dividends under the pandemic

The average rating of stock market analysts:

Strong buy

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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