Over the two years since housebuilder Persimmon (PSN) unveiled its plan to return £1.9bn to shareholders by 2021, it has brought forward the date for these dividend payments no less than three times. Not only does this mean shareholders can expect very a very attractive distribution in 2015, but withcash continuing to roll in and a very well-stocked land bank, we feel there is a good chance that payments could be brought forward again over the next 12 months and there is also potential for the amount of capital being returned to be increased. What's more, Persimmon is in a sector sweet spot based on its exposure to regional markets and relatively low-priced properties - nearly two-thirds of sales are priced below £200,000 - which means it should benefit from recent stamp duty changes.
- Big dividend payout promised
- Significant cash pile
- No exposure to the London market
- Impressive land bank
- Cost inflation on the increase
- Dear on price/NAV valuation
Persimmon's current plan to return about 620p a share between 2013 and 2021 works out at around 620p a share, which equates to a ballpark yield in excess of 6 per cent a year. The main driver of the payout comes from accelerating cash generation, coupled with a strategic aim not to overexpand during the upward phase of the current cycle. At the half-year point at the end of June 2014, the group had net cash of over £300m and a pre-close statement for the full year saw this rise to £378m.