ii view: Persimmon shareholders enjoy double-digit dividend yield

An industry-leading profit margin and a dividend yield in the region of 10%. Buy, sell, or hold? 

Full year results to 31 December

• Revenue up 9% to £3.61 billion
• Pre-tax profit up 23% to £967 million
• Year-end cash held flat year-over-year at £1.25 billion
• Dividend of 125p per share declared 
• Expects to make a further payment of 110p per share later in 2022

Guidance:

• Expects to deliver volume growth of between 4% to 7% for the full year 2022

Chief executive Dean Finch said:

"Persimmon's performance was strong in 2021 as we delivered more homes, built better and strengthened our platform for future growth. Maintaining build rates at pre-Covid levels, we delivered almost 1,000 additional new homes, and improved customer service such that we anticipate receiving a five-star rating in the annual HBF survey later in March 2022, a first in the company's history, whilst also improving our underlying operating margin.

"The new year's trading has started well, with private sales rates ahead by c. 2% in the opening weeks and a robust forward sales position of £2.21 billion.”

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 14,551 new homes in 2021, up from 13.575 in 2020.

For a round-up of these latest results, please click here. 

ii view:

Persimmon is the largest UK housebuilder by stock market value. It has broad UK coverage, with low exposure to the south-east and London, although relatively high exposure to ‘Help to Buy.’ Chief executive Dean Finch took the helm in late September 2020, while current Aviva (LSE:AV.) executive Jason Windsor is set to become its chief financial officer in the summer. Like many rivals, Persimmon has also been returning excess capital to shareholders over recent years, although returns were previously halted given the uncertainty of the pandemic. 

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For investors, rising UK interest rates to battle a 30-year high in inflation and a cost-of-living crisis for consumers warrant major consideration. A 2% rate of private sales in the first eight weeks of the new 2022 financial year contrasts with a 9% sale rate for 2021, while a price-to-net asset value ratio of two times is comfortably above rivals such as Barratt Developments (LSE:BDEV), Taylor Wimpey (LSE:TW.) and Bellway (LSE:BWY) at under 1.5 times, suggesting the shares are not obviously cheap. A further 110p per share dividend payment, scheduled to made in July, remains subject to management review. 

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More favourably, cost inflation is being countered by higher selling prices and prior moves to manufacture its own raw materials. Land buying opportunities are still being found, while forward sales and cash held of £2.21 billion and £1.25 billion respectively both offer some reassurance. For now, and with the shares sat on an historic and estimated future dividend yield of over 10%, income investors continue to be rewarded. 

Positives

• Cash held of £1.25 billion
• Attractive dividend payment (not guaranteed)

Negatives

• Economic outlook uncertainty
• Previously halt dividends under the pandemic

The average rating of stock market analysts:

Buy