The likelihood of Britain’s enduring housing crisis rumbling on long into the future should maintain the Persimmon (LSE: PSN) position as one of the most reliable — not to mention generous — payout stocks on the FTSE 100.
The homebuilding sector is likely to face its most challenging environment in some time during 2017 as signs of rising inflation, falling wage growth, and the broader uncertainties of Brexit dent buyer appetite.
Indeed, a spate of industry releases more recently has suggested the era of spectacular house price growth is about to hit the buffers. Latest data from Rightmove showed home values up 2.3% in February, the lowest rate for almost four years.
Still, supply growth is likely to remain outpaced by homebuyer demand and thus keep earnings at Persimmon and its peers riding higher, with favourable lending conditions allowing Britons to escape the comparatively-expensive rental market.
And the government’s 104-page white paper to fix Britain’s “broken” housing market this month has been criticised by many industry commentators lamenting the lack of detail on how to boost the number of new properties being built.
A lack of cohesive policy to tackle the market balance is nothing new, and looks likely to support earnings at the likes of Persimmon long into the future. And this — combined with Persimmon’s ability to generate gargantuan wads of cash — naturally bodes well for dividend chasers.
The City expects earnings at the London firm to rise 4% and 5% in 2017 and 2018 respectively, albeit down from the double-digit advances of previous years.
Number crunchers expect the dividend to be held at 110p per share through to the end of this year, although this still yields an impressive 5.4%. And rewards at Persimmon are expected to crank higher again from next year — an estimated 111.3p payout is currently forecast, nudging the yield to 5.5%.
Make smoking returns
The addictive nature of the products British American Tobacco (LSE: BATS) sells has long made the business a go-to selection for those seeking excellent dividend growth year after year.
While the cigarette market may be in a state of decline, casting doubts over the Lucky Strike manufacturer’s role as a big income stock in the years ahead, its massive investment drive should soothe even the most fearful of investors.
Massive outlay on brand development is still driving demand for the firm’s so-called Global Drive Brands, with volumes here surging 7.5% in 2016 and market share rising 1%. And British American Tobacco is also spending huge sums on the e-cigarette market, its Vype label helping the company to achieve the largest vapour business in the world outside of the US.
The City expects earnings to grow 14% in 2017 and 8% in 2018 alone. And this is expected to prompt further dividend increases, with expected rewards of 184.7p and 198.2p for this year and next yielding 3.6% and 3.9%.
And with sales of new and established products still taking off, I fully expect payouts at the cigarette giant to keep striding higher.
