Housebuilders like Persimmon (LSE:PSN) haven’t been the most reliable stocks for passive income in recent years. Dividends have been up and down at the FTSE 100 share, largely reflecting weaker homes demand on higher interest rates.
Annual dividends have been kept frozen at 60p per share for the last three years, having been cut by almost three-quarters in 2022. But with the housing market showing signs of sustained recovery, shareholder payouts are tipped to rise sharply again from this year.
It’s important to remember that dividends are never, ever guaranteed. And with the housebuilders still facing headwinds from the UK’s struggling economy, it’s possible that profits — and by extension shareholder distributions — could fall short of estimates.
So how robust are dividend forecasts on Persimmon shares? And should investors consider buying this FTSE stock today?
5.5% dividend yields
| Year | Dividend per share | Dividend growth | Dividend yield |
|---|---|---|---|
| 2025 | 62.4p | 4% | 4.7% |
| 2026 | 68p | 9% | 5.1% |
| 2027 | 73.2p | 7.6% | 5.5% |
When Persimmon rebased dividends three years ago, it said that this reflected “increased uncertainty in the political and macro-economic environment, alongside increased corporation tax and the residential property developer tax.”
With the housing market back in recovery, City analysts are tipping cash rewards to begin rising again, and ahead of the broader market too.
This means that a dividend yield that already beats the FTSE 100’s long-term average of 3%-4% moves even higher over the next three years, peaking at 5.5% in 2027.
In my opinion, there’s good reason to expect Persimmon to meet these forecasts. Dividend cover rises over the period, but at 1.5 times to 1.8 times, still trails the widely accepted safety benchmark of 2 times and above.
But renewed strength in the housing market suggest to me it’s in good shape to meet these forecasts. It also has a robust balance sheet to support dividends (net cash was £258.6m at the close of 2024).
Sales recovery
Persimmon’s latest trading update last week (1 May) underlined the improving robustness of its markets. It said Net private sales per outlet per week ticked up to 0.74 between 1 January 2025 to 27 April 2025 from 0.73 a year before.
Meanwhile, total forward sales ticked 12% higher, to £2.3bn, while forward sales on its higher-margin private homes were up 17% year on year.
Accordingly, the company affirmed hopes of booking completions of between 11,000 and 11,500 for the full year. This is up from 10,664 in 2024 and 9,922 the year before that.
A FTSE 100 bargain?
With interest rates steadily falling (they were cut again this week to 4.25%), and mortgage market competition ratcheting up, there’s a good chance earnings and dividends will rebound sharply from this year.
Yet I don’t think this is reflected in the cheapness of its shares.
The housebuilder’s 2025 price-to-earnings (P/E) ratio of 14.1 times doesn’t seem anything to write home about. However, a quick glance at its price-to-earnings growth (PEG) multiple implies it’s actually attractively prices relative to expected profits.
At 0.9, this is a whisker below the widely regarded value benchmark of 1 times.
With Persimmon also carrying those huge dividend yields, I think it’s a great FTSE 100 bargain to consider.
