It’s fair to say that my investment in Persimmon (LSE:PSN) hasn’t gone to plan, so far. I bought the FTSE 100 housebuilding share at around £22.10 back in June 2022. Today, it’s changing hands for just £11.92.
Falling inflation — and buoyant hopes of sector-boosting interest rate cuts — allowed the housebuilder to pick up momentum around summer 2023. But Persimmon’s rebound didn’t endure, its share price entering a fresh slump late last year as worries over Bank of England (BoE) policy returned.
Despite its underperfomance, I’m not wringing my hands with angst. I buy shares with a long-term view, and I’m confident the company will eventually deliver robust returns.
In fact, as a keen dividend investor, I’m considering increase my stake after the price weakness of recent months.
Dividend growth
For income chasers, Persimmon shares have been a disappointing investment in recent times. In response to the housing market slump, it hacked the full year dividend back from 235p per share in 2021 to 60p per share the year after. It’s kept cash rewards locked at those levels too, amid ongoing industry uncertainty.
But with homes demand back in recovery, City analysts are expecting dividends to start growing again from this year:
| Year | Dividend per share | Dividend growth | Dividend yield |
|---|---|---|---|
| 2025 | 64.89p | 8.2% | 5.4% |
| 2026 | 70.79p | 8.1% | 5.9% |
There’s a couple of important things to note here. Firstly, these forecasts suggest dividends could grow ahead of the broader FTSE 100. AJ Bell, for instance, believes total dividends from the UK’s blue-chip index will rise 6.5% year on year in 2025.
Secondly, current dividend projections on Persimmon shares leave it with yields that smash the Footsie average of 3.6%.
However…
But before we get ahead of ourselves, it’s critical to remember that dividends are by no means guaranteed. And especially in uncertain economic times like these.
As with the broader FTSE, dividend forecasts could be blown off course by outside events. In Persimmon’s case, I’m particularly nervy about a sustained pickup in inflation, and what this could mean for future interest rates and home sales.
Yet a string of strong sector updates — including from Persimmon — have boosted my confidence that dividends may be on the up and up.
Improving outlook
In its full-year trading statement on Tuesday (11 March), Persimmon said completions and pre-tax profit rose 7% and 10% respectively in 2024. Indeed, profits of £395.1m came in ahead of analyst expectations.
Encouragingly for 2025 and beyond, the builder’s got the new year off to a flyer too. Average selling prices rose 3% in the first nine weeks of 2025, while net weekly private sales per outlet were up 14%.
This means Persimmon’s order book is up a whopping 27% year on year, at £1.15bn. It’s now targeting 11,000-11,500 completions in 2025, up from 10,664 last year.
There are risks to these forecasts, which I’ve mentioned above. But on balance, I’m optimistic the company may have turned the corner. I’m expecting BoE interest rate policy to remain supportive over the short-to-medium term, with inflation moving lower and policymakers acting to support the economy.
And with a strong, debt-free balance sheet — Persimmon recorded cash of £258.6m as of December — I’m hopeful the company can make good on the City’s juicy dividend forecasts.
This post was originally published on Motley Fool
