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Persimmon shares are sharply higher this morning as the housebuilder issues a bumper pay-out to shareholders. With FY pre-tax profit improving by a quarter, helped by an impressive 28.2% operating margin (+320bps) and £2.03bn in forwards sales (+7.5%), management has committed to a capital returns plan which will see the company pay an additional 125p special dividend per share over the next three years to bring the total dividend pay-out to £13 per share by 2021. With the shares trading at £27.90, this represents a 46% return.
Today’s announcement comes is a welcome surprise to shareholders, with the total value of the special dividend twice the size previously guided to by management. Alongside an unchanged 110p final dividend, this takes Persimmon’s total dividend pay-out to 235p per share, which equates to a whopping 8.5% yield, the best the UK 100 currently has to offer income seekers, and ahead of peers Barratt Developments (7.9%) and Taylor Wimpey (7.1%).
Amid ongoing controversy over the size of CEO Fairburn’s personal pay packet, choosing to reward loyal shareholders almost as handsomely is being met with understandable positivity. Moving forwards, whether peers choose to match Persimmon’s bold pledge will be a pivotal dilemma for a sector potentially on the front line of Brexit uncertainty.
Shares have returned to 2018 highs circa 2800p on the back of today’s sharp move higher, however have yet been unable to hold above the key level. Note rising lows support around 2700p now back in play, as well as a reciprocal benefit for peers around 1-2% higher this morning.
Henry Croft, Research Analyst, 27 February 2018
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