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Berkeley to buy back undervalued shares

Shareholders will still be paid a bumper dividend, but this will now be less the cost of any buybacks
December 5, 2016

Berkeley Group (BKG) reaffirmed its commitment to pay £16.34 in dividends by 2021, but will now pay the outstanding £10 per share through a mixture of dividends and share buybacks. This will generate better value considering that the shares are trading around the sector average in price/net asset value terms while delivering a return on equity 40 per cent above the sector average. Subject to shareholder approval, Berkeley will announce the dividend in February and August each year (the next one is 100p) less the cost of any share buybacks.

IC TIP: Buy at 2630p

Reservations were down 20 per cent from the same period last year as a result of higher stamp duty and a decision by some potential buyers to hold back. Forward sales were down from £3.25bn to £2.9bn, while the estimated gross margin from the 42,125 plots in the land bank was down from £6.1bn to £5.9bn.

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