The Motley Fool

Can the Persimmon share price keep climbing?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Modern suburban family houses with car on driveway
Image source: Getty Images

The Persimmon (LSE:PSN) share price has been on fire lately. Since the start of 2021, it’s moved up by around 16%. And over the last 12 months, it has increased by 35%. Obviously, this level of growth is hardly extraordinary compared to the upward trajectories of other stocks. But considering that Persimmon is a homebuilder, this growth is quite impressive. At least, I think so, especially since even after this jump in price, the dividend yield is still above 7%. But can the share price climb even higher? And are there any risks I should be aware of?

The rising Persimmon share price

The pandemic has disrupted many businesses, and Persimmon is no exception. Its share price crashed by more than a third in early 2020 as housing construction came to a halt. But over time, as lockdown restrictions eased and the vaccine rollout continued, it could resume building homes. And looking at the most recent trading update, it seems Persimmon and its share price have made a complete recovery.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Build rates have returned to pre-Covid levels, and the management team expect the first half-year 2021 project completions to be in line with 2019 levels. What’s more, due to the continually rising demand – something I’ve previously pointed out – the firm’s forward sales position has increased to £3bn. By comparison, this figure was only £2.4bn in 2020 and £2.7bn in 2019. So that’s an 11% increase versus pre-pandemic levels.

Combining a rising top line with a healthy balance sheet, the management team has announced further dividend payments of 55p in August and December this year. Merging these with the previous interim dividend of 125p last March indicates the reinstatement of its 235p per share annual payout. In other words, the current 7.4% dividend yield looks sustainable in the eyes of management. That’s a promising sign for any income investor.

Nothing is risk-free

Income stocks are often perceived as low risk. But there is no free lunch in the world of finance, and Persimmon has some threats on the horizon.  The main one being government support schemes.

For several years, the Help-to-Buy scheme has made housing considerably more affordable for individuals, especially for the younger generation. Consequently, homebuilders like Persimmon have greatly benefited from the increased volume of sales. But this scheme is soon coming to an end and has already been getting more limited. Maximum home price restrictions were recently added, and the entire programme is timetabled to end in March 2023.

Given how dependent homebuilders and buyers have become on these support programmes, I think we’re likely to see some volatility in house prices when they come to an end. Needless to say, that’s not good news for Persimmon or its share price.

The Persimmon share price has its risks

The bottom line

This looming threat remains a prominent issue. However, the management team still has another two years to prepare. During that time, sales are likely to keep rising, with the proceeds being returned to shareholders through dividends. And so, I believe the Persimmon share price can continue climbing from here. At least, for now. Therefore I would consider adding this business to my income portfolio. But, I’ll be keeping a close eye on how the company intends to move forward post-2023.

But its not the only income stock I have on my radar. Here is:

The Motley Fool UK's Top Income Stock...

We think that when a company’s CEO owns 12.1% of its stock, that’s usually a very good sign.

But with this opportunity it could get even better.

Still only 55 years old, he sees the chance for a new “Uber-style” technology.

And this is not a tiny tech startup full of empty promises.

This extraordinary company is already one of the largest in its industry.

Last year, revenues hit a whopping £1.132 billion.

The board recently announced a 10% dividend hike.

And it has been a superb Motley Fool income pick for 9 years running!

But even so, we believe there could still be huge upside ahead.

Clearly, this company’s founder and CEO agrees.

Learn how you can grab this ‘Top Income Stock’ Report now

Zaven Boyrazian does not own shares in Persimmon. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.