2020 has proven to be a challenging year for dividend investors. Literally hundreds of UK shares have reduced or axed shareholder payouts in the wake of the Covid-19 outbreak. Rising infection rates, and the consequences for corporate profits, mean that further rounds of drastic action could be around the corner too.
This is no reason for UK share investors to throw in the towel though. There are still stacks of top stocks in great shape to pay big dividends in the near term and beyond. Indeed, the 2020 stock market crash leaves plenty of these dividend heroes boasting eye-popping yields. There’s no shortage of income shares I’m considering buying for my own Stocks and Shares ISA today.
A top UK share for dividend investors
Persimmon (LSE: PSN), for one, could prove to be a wise buy before its next trading update on Tuesday, November 10. Intense economic uncertainty and the pulling of low-deposit mortgages by Britain’s lenders has done little to water down electrifying homebuyer demand. This is why the latest Nationwide house price index showed home values rocketing at their fastest rate for almost six years in November.
FTSE 100-quoted Persimmon illustrated this fertile trading environment in its August half-year report. Then it said that its order book of £2.5bn was up more than a fifth from the same point in 2019. It said that average weekly private sales rates per site since the beginning of July had soared by 49% too. Put simply, there aren’t enough homes being built to meet demand. So those properties provided like this particular UK share continue to sell like hotcakes.
Positive trading updates from other housebuilders suggest that trading conditions keep improving too. Take Crest Nicholson as an example. On Tuesday, the FTSE 250 builder described current sales rates as “robust” and said that sales were better than before the Covid-19 lockdown in the spring.
Trading has been so strong that the UK share upgraded its full-year expectations for the 12 months ending October 2020. I’m confident that Persimmon could well put out a consensus-beating statement of its own in the coming days.
8.8% dividend yields!
It’s no wonder City analysts expect Persimmon to rebound strongly from 2020 when lockdown measures hammered construction rates and consequently profits. They reckon the UK share will record an 8% improvement in annual earnings next year, with sales supported by low interest rates and ongoing government support like the stamp duty holiday and Help to Buy equity loan scheme.
This leaves the FTSE 100 colossus trading on a rock-bottom price-to-earnings (P/E) ratio of 10 times for 2021. However, this isn’t the only reason why Persimmon is such a top pick for value chasers. Brokers expect that the annual dividend will soar from around 120p per share in 2020 to roughly 204p next year. And as a result the yield leaps from a meaty 5.2% for the current period to 8.8% for 2021.
Royston Wild has no position in any of the shares mentioned. 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.