This week we choose a special situation in an area of recovery. U.K housing is underpinned by strong fundamentals. Basically, too many people, too few houses. On an affordability basis i.e income to house prices, they are not cheap, but sustained low interest rates help to remedy this. The government is helping indirectly here by providing stimulus to the banks through a very loose monetary policy. Once the banks stop rebuilding their balance sheets, they will focus on doing what they are meant to. Taking deposits and lending on an interest rate differential.
It seems incredible, given that Taylor Wimpey was effectively declared bust by the market just a few short years ago (a big error as it now sits almost 1500% above the low) as so called market professionals dumped the stock. Now I am now recommending a housebuilder for dividend of the week. However, it is unavoidable, given the circumstances. In it’s last interim report, Persimmon did not declare an interim dividend, but instead declared its intention to return to shareholders some £1.9 billion (£6.20 per share) over the next 9 years. This starts with a dividend in June 2013 of 75p / share.
The recent trading statement on 8th January points to an improving business:
‘The volume of new homes legally completed increased by 6% over the prior year to 9,903 (2011: 9,360). With an average selling price of c. £173,400 (2011: £163,999), also 6% ahead of the prior year, revenues for the period totalled c. £1.72 bn (2011: £1.54 bn), an increase of 12%.
We welcome the renewal of the Government sponsored FirstBuy scheme on 26 September 2012 which has led to a strengthening of first time buyer interest in our sites as we re-launched our FirstBuy marketing programme. We have recently secured an additional allocation of c. 3,000 new homes as part of the FirstBuy funding. As a result, we anticipate an increase in sales to first time buyers as we enter the new spring season in 2013.
As indicated in our Interim Management Statement on 13 November 2012 our underlying operating margin continued to strengthen in the second half and we anticipate that it will be c. 13% for the full year (2011: 10.0%), with our second half margin over 13.5% (2011: 10.8%).”
On the DividendMax Optimizer, Persimmon is by far the biggest yielder of the housebuilders with an annualised 3 year yield over 10% per annum. Looks attractive to me!
