The Taylor Wimpey (LSE: TW) share price has suffered this year amid fears of a recession. However, some data seems to suggest strength in the housing market, and could serve as catalysts to spark a further rally.

Builds are looking up

Compared to pre-pandemic levels, Taylor Wimpey posted an excellent set of numbers for the first half of 2022 with results coming in above analysts’ consensus. This then sparked a 10% recovery in the share price.

With such solid numbers and positive guidance, it doesn’t seem like Taylor Wimpey is likely to lose momentum any time soon. Cancellations in absolute numbers are down, while customer interest remains high, and orders for the rest of the year are almost filled.

In fact, management is so confident about the company’s future that they’ve decided to increase the interim dividend by 12%, to 4.62p per share. This confidence was further reflected in a couple of high-ranking directors purchasing £50,000 worth of shares in August, so far.

Moreover, the company recently launched its new range of energy efficient homes. With the national EPC rating currently at D, I’m expecting these new homes with average EPC ratings of A or B to capture more market share.

Rough landing

Despite the upbeat outlook though, the wider macroeconomic data hasn’t quashed fears of a house market crash. As a result, the Taylor Wimpey share price recovery has stalled. This is a reflection of stalling house prices seen in the most recent RICS House Price Balance and Nationwide House Price Index.

Furthermore, mortgage approvals have been steadily falling according to the UK’s biggest mortgage lender, Lloyds. Along with this, mortgage repossessions saw an uptick in the first three months of the year.

To make matters worse, mortgage rates are expected to go higher with interest rates. This would affect the 2m households currently on variable mortgages, and another 1.8m households on fixed rate mortgages that expire next year.

Additionally, Taylor Wimpey faces trouble building more homes due to a nutrient neutrality issue. This is a problem regarding new developments exacerbating nutrient burdens on the soil in the area. The issue is expected to affect up to 120,000 homes across England. Nonetheless, CEO Jennie Daly is confident that the FTSE 100 firm’s large and geographically diverse land bank puts it in a good position to overcome this challenge.

Curb my optimism

Having said all that, I’m still a fan of Taylor Wimpey shares. Its balance sheet is solid, and it boasts quality earnings with high margins. Its dividend continues to see healthy increases too, with CFO Chris Carney stating that it would still be able to pay £250m worth of dividends even in its worst projected economic scenario.

But as much as I am positive about Taylor Wimpey’s numbers, I don’t think its share price will be rebounding into the green soon. I just don’t think the company has a unique enough selling point to outperform the wider market. Not to mention, there’s also a potential recession on the cards. Therefore, I’ll be putting Taylor Wimpey on my watchlist for the time being, and may open a position if its share price continues to dip, as I believe that its upside would be rather attractive.

The post Will the Taylor Wimpey share price rebound soon? appeared first on The Motley Fool UK.

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John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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.

The Taylor Wimpey (LSE: TW) share price has seen a 10% recovery since it bottomed in mid-July, although it’s still in the red. With that in mind, I could consider buying some of its shares before a stock market recovery gets underway.

Building momentum

The FTSE 100 housebuilder reported its half-year results recently, and I must admit that I was rather impressed. The increase in house prices has managed to offset inflation in build costs, leading to an increase in operating margin, and that sat well with investors as its share price saw a 5% increase.

Although several figures saw declines, it’s important to consider context. For instance, the lower level in completions is due to tougher comparisons from last year, which saw orders from Q4 2020 pushed into H1 2021. Additionally, the fall in EPS is attributed to the increase in the pre-exceptional tax rate from 18.3% to 22.1%, as a result of the introduction of the property developer tax. Finally, the decline in free cash flow was down to further investments in land and current projects.

So, despite the drop on the top and bottom lines, Taylor Wimpey is still growing healthily. The board even revised its outlook upwards for the full year. They’re now guiding for FY22 results to be around the top end of analysts’ consensus.

Strong pipeline

Even though management’s guidance is upbeat, it becomes a bit of a head-scratcher when taking the recent house price data into consideration. For example, the latest RICS house price balance indicates that house owners are expecting prices to decline over the next 12 months.

These expectations go hand in hand with the narrative that house affordability will dwindle as the Bank of England increases interest rates, thus driving mortgage rates higher. The effects of this can already be seen in the most recent Nationwide house price index, as house prices are beginning to stall. With inflation expected to only peak at 13%, the Bank still has a long way to go in its rate-hiking process.

Nonetheless, the Taylor Wimpey board still struck an optimistic tone in their H1 earnings call, and I can see why. For one, customer interest remains at high levels. Moreover, the property developer is already 92% forward sold for FY22, and has opened orders for Q1 2023. More importantly, cancellations in absolute numbers are down 9% year over year (yoy), and down 29% from 2019.

Solid foundations

Taylor Wimpey has got an excellent balance sheet. The company has a stellar debt-to-equity ratio of 2%, with £4.28bn in cash and only £87m of debt. Not to mention, the firm saw its profit margins increase by 2.5% (yoy). To complement this, its massive short-term land bank of ~88,000 plots leaves its business well positioned and flexible.

Therefore, despite macroeconomic indicators painting a gloomy picture, Taylor Wimpey looks to be heading in the opposite direction for now. But even with a decent price-to-earnings (P/E) ratio of seven, I’m cautious about buying Taylor Wimpey shares. The possibility of the UK staying in a recession for a prolonged period could send house prices and its share price lower. As such, I’ll be putting Taylor Wimpey on my watchlist for the time being, and may consider buying once housing data improves.

The post Should I snap up Taylor Wimpey shares at £1.30? appeared first on The Motley Fool UK.

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John Choong 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.

Taylor Wimpey (LSE: TW) shares, along with other housebuilder stocks, have been in a steady decline this year. The stock is down by more than 30% on a year-to-date (YTD) basis. But with a price-to-earnings (P/E) ratio of 8 and a dividend yield of 7%, its shares look lucrative to me.

Housing market gets wimpy

The rise in mortgage rates paired with sky-high inflation have pushed both the Halifax and Rightmove House Price Index to indicate slowing house price growth. Consequently, analysts are predicting prices to drop in the coming months. This has been one of the main reasons behind the drop in the Taylor Wimpey share price.

This trend has been further underlined by the latest RICS data, which has shown that house prices have seen the lowest increase in over a year. The index measures the percentage of surveyors reporting a house price rise in their designated area, minus those reporting a fall.

More crucially, however, the Help to Buy scheme is set to end in March. With the scheme contributing to 36% of Taylor Wimpey completions last year, this could have a substantial impact on the housebuilder’s top line.

In a tight spot

The UK housing market has been lacking supply for quite some time now. As such, the Taylor Wimpey board has talked of its commitment to addressing the housing shortage. It has cited plans to significantly increase annual completions in the next few years. However, this is on condition that the market remains broadly stable, which may not be the case if it starts to dip.

A lack of demand gives less incentive for housebuilders to meet supply needs, especially when it drives house prices further down. Not to mention, higher material, fuel, and labour costs will impact profit margins as well. These factors don’t give the developer any reason to build more houses.

Furthermore, Taylor Wimpey faces tough competition from Persimmon and Barratt. It has the fewest number of completions as compared to the other two housebuilders, and has a higher average house price than the former. This puts it in a tough spot in the market without a unique niche. Therefore, the company’s fate is in the hands of the wider housing market for the time being.

Landing big profits?

So, are Taylor Wimpey shares worthy of an investment on my part? Well, the builder has an excellent set of financials — a 1.9% debt-to-equity ratio, £921m in cash, and a 13% profit margin. This shows healthy pricing power and a strong balance sheet to withstand a recession. Moreover, it’s got a landbank of approximately 232k plots, giving it a lot of room to build. This is evident from its £3bn backlog in orders.

That being said, I’ll only be putting Taylor Wimpey on my watchlist for now. While its exposure to markets across the UK gives it more potential to expand, I don’t think it has a strong enough unique selling point given the current macroeconomic environment. As a result, I don’t see this as an opportune time to buy its shares as I expect the housing market to cool further. But if its share price continues to drop, I may consider opening a position, as the British housing market has a history of providing healthy, long-term returns.

The post Are Taylor Wimpey shares a buy at £1.20? appeared first on The Motley Fool UK.

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• An 8.8% forecast dividend yield! 1 FTSE 100 income share to buy today after bullish 2025 numbers?
• Investors are rushing to buy these before the Stocks and Shares ISA deadline. Should we join in?
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Standing tall

As mortgage rates continue to rise as a result of interest rate hikes, demand for homes has cooled. This can be seen in Rightmove‘s June house price index, which shows that house price growth is slowing. As such, analysts are actually expecting prices to drop, hence the overall weakness among the FTSE 100 housebuilder stocks.

Nonetheless, Berkeley stands out as doing better than its Footsie peers year-to-date (YTD). The shares’ performance becomes even more puzzling when I consider that it’s the only developer not paying a dividend. So, what’s behind the stock’s relative strength (bearing in mind that it’s still down this year)?

Berkeley loves the south

Upon analysing the number of houses built, Berkeley’s more solid stock performance gets even more confusing. The Croydon-based developer doesn’t even rank within the top five builders in Britain for house completions.

However, there’s a metric in which Berkeley excels in — average selling price. Due to the housebuilder’s speciality in building posher, London properties, its average house price is two to three times higher than its competitors.

As a ‘luxury’ builder, Berkeley has been able to pass on most of its higher costs to its customers without impacting demand. This was evident in its FY22 results with management citing resilient demand for its properties.

Moreover, Berkeley’s exposure to London and the South East has allowed it to benefit from higher house prices, with the average house price in the capital costing £530,000. This is almost double of the UK average. More importantly, the lack of supply in these regions will most probably protect Berkeley’s top line from declining house prices.

Built like bricks

Aside from its solid stock performance, Berkeley also boasts a solid balance sheet. Although its debt-to-equity ratio of 21% is slightly higher than that of its FTSE 100 peers, its cash position covers its debt comfortably. Additionally, it’s got the second highest profit margin in the industry, at 20.5%, which is also higher than the industry’s average.

Having said that, it mentioned free cash flow of -£131m in its latest results. This would normally alarm me, but this was down to the company’s recent acquisition of St. William. This free cash flow impact should be a one-off and the board expects positive cash flow ahead. The company sold 42% more homes last year after all, and has an order backlog worth £2.2bn, which is an increase from £1.7bn a year ago.

I think Berkeley could be a lucrative housebuilder for me to invest in, if not for one thing. A great deal of uncertainty lies ahead for the housing market, with a potential recession on the cards, the company may be vulnerable, even with its London exposure. For that reason, I’m not ready to buy Berkeley shares at the moment. Instead, I’ll be scouting for potential winners in the event of a stock market crash.

The post Is this FTSE 100 stock the best housebuilder to invest in? appeared first on The Motley Fool UK.

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John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended Redrow. 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.

Persimmon (H1 trading update)

Persimmon (LSE: PSN) is one of Britain’s biggest and most renowned housebuilders. It builds properties ranging from flats to large family homes located across the UK. The FTSE 100 firm is expected to provide a trading update for its most recent half-year performance ending June 2022 on Thursday 7 July.

Analysts in the UK don’t normally publish earnings previews for six-month periods, so it’s best to compare the firm’s upcoming 2022 first-half numbers to the ones from a year before. The H1 2022 figures can also be useful to determine whether it’ll outperform its FY21 numbers, or even beat analysts’ FY22 forecasts.

In this case, Persimmon is predicted to show slight growth in its numbers as housing supply continues to attempt to match high demand. If the housebuilder posts a better-than-forecasted number on Thursday with positive guidance, it could be on course to beat its financial year estimates.

Entain (H1 trading update)

Entain (LSE: ENT) is an international sports betting and gambling company. It owns brands such as Bwin, Coral, Ladbrokes, PartyPoker, and Sportingbet. Entain will provide a trading update for its most recent half-year performance ending June 2022 on Thursday 7 July.

Based on the earnings preview, Entain expects to have a much stronger second half to its financial year than its first. Nonetheless, a headline beat on its previous year’s H1 results could spell a positive outlook for the firm.

Vistry (H1 trading update)

Vistry (LSE: VTY) is another housebuilder that’s providing investors with a trading update. The Kings Hill-based firm will be updating shareholders on for its most recent half-year performance ending June 2022 on Thursday 7 July.

Just like its peer, Vistry is also expecting modest growth in its numbers. This is expected to come from rising house prices. The key metric to look out for will be its diluted earnings per share metric. A better than expected number could make analysts’ predictions of achieving a much higher EPS later this year possible.

The post Earnings preview: Persimmon, Entain, Vistry appeared first on The Motley Fool UK.

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John Choong 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.

Boris Johnson’s Conservative government announced a new, Help to Build scheme late last week. The new proposal is meant to help Britons get onto the property ladder amid the increase in house prices outstripping wage growth. So, here are three FTSE shares that I think stand to gain from this new programme.

Grafton

Grafton (LSE: GFTU) is a FTSE 250 constituent, and could be a beneficiary from the Help to Build scheme. This is because, unlike Help to Buy, the new initiative won’t directly benefit property developers such as Barratt and Taylor Wimpey. The loan is only available for houses built by self-builders and custom builders. As the scheme is set to last until 2026, the group could end up benefiting from a long-lasting tailwind.

Grafton is a builders merchant that sells all sorts of goods required to build a house. These include building materials, timber, decor, DIY items, and pipes. Its manufacturing segment only accounts for 5% of its revenue, so I expect the business’ distribution segment to fair better from the new builds. Not to mention, its history of producing healthy profit margins makes it an attractive stock for me to purchase. However, it’s worth noting that the current cost-of-living crisis could hamper sales figures.

Breedon

Breedon (LSE: BREE) is the UK’s largest independent construction materials firm. It is listed on the FTSE AIM index. The company produced a combine 31.6m tonnes of cement and aggregates in 2021. But more importantly, the board expects further growth this year.

Constructing a new house typically uses more than a 100 tonnes of cement and aggregates. Therefore, I expect the Help to Build scheme to act as a tailwind for the FTSE firm. That being said, Breedon’s revenue doesn’t just stem from building houses. It paves roads and builds other infrastructure as well. Given how well the S&P Global/CIPS UK Construction Purchasing Managers Index (A measure of how well the construction sector is doing) has been performing, Breedon shares could improve in the long term. Its share price also currently trades at a decent price-to-earnings (P/E ratio) of 13, so I see this as a buying opportunity for me.

Dunelm

Inflation continues to run rampant. Thus, new home owners will be looking for bargains in furniture. Thankfully, FTSE 250 staple Dunelm (LSE: DNLM) provides exactly that. Its everyday necessities have an average price of £6, while its furniture has a low average price of £120.

Management has stated its goal of bringing better value proposition to its customers too. This is evident as Dunelm introduced more entry price products and promotional buys, which should entice more customers and purchases.

The retailer still has to compete with IKEA though, as its competitor offers cheaper products in certain categories. That being said, consumers still seem to prefer shopping at Dunelm. This is due to its excellent customer service, such as cheaper deliveries. On that account, as long as Dunelm can maintain its competitive prices and good customer service, I see it being one of the few FTSE shares riding the tailwinds of the new Help to Build scheme.

The post 3 FTSE shares I’m buying with the Help to Build scheme! appeared first on The Motley Fool UK.

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John Choong has no position in any of the shares mentioned at the time of writing. 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.

Taylor Wimpey loses interest

Last month, the UK central bank opted to continue its rate hikes, bringing interest rates to 1%. Consequently, the mortgage rate has spiked to 4.1%, having spent the majority of last year at 3.6%. Worries that higher interest rates could result in a house market crash have spooked Taylor Wimpey investors into a sell-off.

Both Halifax’s and Nationwide’s data continue to show that house prices are on the rise. However, both companies have forecasted a cooling of house price growth as we head into winter. In fact, the cracks are already starting to mount. Since the second half of April, around one in 20 properties have had price reductions of 5% or more. This is an increase from one in 22 properties from March, sending the Taylor Wimpey share price lower.

Glass ceiling

Despite the expected cooldown in house prices, Taylor Wimpey can only grow so much. Management mentioned that output of houses have taken a setback due to expensive raw materials and supply chain bottlenecks. Moreover, higher inflation and a low unemployment rate is putting pressure on profit margins. This was evident in the FTSE 100 firm’s FY2021 results, as profit margins decreased 2.5% from two years ago. That being said, Taylor Wimpey provided a positive set of guidance for the year ahead.

Whilst interest rates have risen, they remain at historically low levels and, with good availability of competitively priced mortgages, we are experiencing strong levels of customer interest.

Source: Taylor Wimpey 2022 Annual General Meeting

Tough as bricks?

Even though scepticism fills the air around housebuilder shares, I think there might be a buying opportunity for me here. For one, renowned real estate agent Jeremy Leaf said, “Activity in the market at the moment is more determined by a shortage of stock rather than a softening of demand being prompted by the cost-of-living crisis.” This gives me reason to believe that house prices may just hold its weight despite a slow down in price growth.

Aside from that, Taylor Wimpey shares are also very cheap currently. The stock boasts an excellent price-to-earnings (P/E) ratio of 8, making it cheaper than the market average of 15. The British housebuilder also has one of the better dividend yields in the FTSE 100 index, at 6.6%. Paired with a flawless balance sheet, Taylor Wimpey’s fundamentals are extremely solid.

Nevertheless, I am wary that the Taylor Wimpey share price could continue to drop. The Bank of England forecasts an economic contraction to occur later this year, which will not do house prices any favours. Therefore, although there’s strong upside potential, Taylor Wimpey shares are too big of a risk for me to take, and I won’t be buying them right now. Instead, I’ll be looking to purchase other shares that could benefit my portfolio with more financial security in a potential stock market crash.

The post The Taylor Wimpey share price is down 25%. Here’s why appeared first on The Motley Fool UK.

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John Choong has no position in any of the shares mentioned at the time of writing. 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.

HSBC

The HSBC share price has had a volatile time so far this year. The stock jumped nearly as high as 25% only to drop back down to a 5% gain this year. This has been mainly down to speculation of the bank having to break up its Asian and western operations. Amid all of the volatility however, it still didn’t stop a director from acquiring shares this week.

Dame Carolyn Fairbairn (The former CBI Director General) purchased a large number of HSBC shares on Wednesday.

• Name: Dame Carolyn Fairbairn (Non-executive Director)
• Nature of transaction: Acquisition of shares
• Date of transaction: 18 May 2022
• Amount purchased: 15,000 @ £5.01
• Total value: £75,150.00

National Grid

National Grid disclosed its FY22 results this week. The energy company reported an underlying operating profit of £4.0bn, which is 11% higher year on year. The firm also announced a final dividend of 33.76p, bringing the total dividend to 50.97p. This is a 3.7% increase in its yield. As a result, the National Grid share price is now up by more than 10% this year, sparking interest by a director in buying shares.

There’s still plenty of worry in the air. Talk of a possible windfall tax on energy companies has hindered the stock’s trajectory upwards. Nonetheless, a non-executive director still saw this is an opportunity to buy National Grid shares on Thursday.

• Name: Victoria Wood (CAP of Tony Wood, Non-executive Director)
• Nature of transaction: Acquisition of shares
• Date of transaction: 19 May 2022
• Amount purchased: 2,000 @ £12.29
• Total value: £24,586.60

Taylor Wimpey

Housebuilding giant Taylor Wimpey had a relatively decent week. Its shares managed to outperform the wider FTSE 100 index as it gained over 2%. Its stock is still down by more than 25% this year, but a number of director dealings are still happening inside the company, suggesting confidence that it has a bright future in the long term.

Although higher mortgage rates are expected to cool the housing market, Taylor Wimpey said: “Demand for our homes remains strong, with the business well positioned to deliver further progress in 2022 and beyond” in its most recent trading update. As such, a number of directors added more shares to their portfolio.

• Name: Jennie Daly (CEO)
• Nature of transaction: DRIP shares
• Date of transaction: 13 May 2022 (Reported 17 May 2022)
• Amount purchased: 5,815 @ £1.25
• Total value: £7,260.42

• Name: Chris Carney (Group Finance Director)
• Nature of transaction: DRIP shares
• Date of transaction: 13 May 2022 (Reported 17 May 2022)
• Amount purchased: 6,513 @ £1.25
• Total value: £8,131.92

To provide context, DRIP shares are usually part of a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to award equity to employees flexibly. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

There are many types of shares in an SIP. But in this instance, the CEO and Group Finance Director used the dividends they received on SIP shares to reinvest into further Taylor Wimpey shares. It should be noted though, that dividend shares must normally be held in the trust for at least three years to get full tax relief.

The post Director dealings: HSBC, National Grid, Taylor Wimpey appeared first on The Motley Fool UK.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended HSBC Holdings. 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.

Strong trading

It’s a fair question, particularly as Persimmon stated this morning that trading between the beginning of July to 8 November had been “strong“. It now expects a 10% rise in legal completions in 2021 over that achieved in the lockdown-heavy 2020. Average private new home reservations per site were approximately 16% ahead of (pre-pandemic) 2019 too. No wonder the FTSE 100 property juggernaut reflected that the housing market had taken recent changes to government schemes and the removal of the stamp duty holiday “in its stride“.

Aside from this, Persimmon expects margins to “remain resilient” even in the face of rising build costs. Despite planning delays, the company thinks interest in new developments from potential buyers and good mortgage availability should fuel further growth as well.

So, why is the Persimmon share price falling?

Despite this bullish update, the Persimmon share price was firmly lower this morning. Taking this fall into account, the company’s valuation has now fallen 16% in the last six months. It’s now 5% lower than where it stood 12 months ago.

The reasons behind this are probably numerous:

#1 Old-fashioned profit-taking: At the height of the Covid crash, the Persimmon share price fell very close to 1,600p. Anyone buying at this level would have enjoyed seeing their capital double in just 12 months. For a FTSE 100 company, that’s a stunning result. As such, I can’t blame anyone for simply wanting to bank some gains.  

#2 Housing market has peaked: In the aftermath of the global pandemic, UK house prices have soared. With the arrival of the traditionally quieter winter trading period, however, it might be suggested that the market has peaked for now. And if interest rates do rise sooner than later, there’s no guarantee 2022 will be as good as Persimmon thinks.

#3 Supply chain issues: Despite stating that it had managed to navigate industry supply chain issues well, there’s a chance things could get worse before they get better. A shortage of materials may delay completions. This, in turn, could push more investors towards the exits.

Great opportunity?

Due to their cyclical nature, housebuilders rarely make it onto my share watchlist. I’ve also had an aversion to Persimmon since it awarded a former CEO a frankly ludicrous amount of money as he left the company. Nevertheless, it does score very well on my ‘quality’ checklist. Returns on capital and margins are high relative to peers (and the market as a whole).

Another potential attraction is the great income stream. Persimmon offers a staggering 8.9% forecast yield at today’s price. Then again, I note that expected profit may only just cover this payout. Should earnings slip unexpectedly, a dividend cut certainly isn’t out of the question. 

Still, PSN does have a £895m in cash on its balance sheet. The stock is also reasonably priced on 11 times forecast earnings.

Stay diversified

While Persimmon’s share price performance over recent months has been disappointing, I don’t see any reason for holders to panic. Yes, the need to remain diversified is as important as ever. However, there’s still a lot to like here.

Is it time for me to change my mind on housebuilders and add one to my portfolio? Possibly.

The post What’s going on with the Persimmon (PSN) share price? appeared first on The Motley Fool UK.

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• What on earth’s going on with the Persimmon share price?
• Homebuilders down 30%! Is the UK stock market heading for a 2008-style crash?

Paul Summers 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.

Earnings rebound

Earlier this week, Shell revealed a strong set of results. A sizeable recovery in earnings over Q2 was recorded, prompting free cash flow to soar. As one might expect, the BP share price rose by association. I wonder if there could be more to come in the next few days. The FTSE 100 titan is scheduled to provide an update on its second quarter on 3 August.

This is not to say that BP is a one-way bet. A rising oil price is beneficial, but last year showed how volatile a commodity like black gold can be. On a longer timeline, it seems inevitable that demand will drop as the cost of buying electric vehicles falls. BP’s need to adapt won’t come cheap either. This might help explain why the shares are still far below pre-pandemic levels.

On the other hand, one might say that a P/E of just 8 suggests these potential headwinds are already priced in, especially if the company ends up beating analyst expectations next week. Even if it doesn’t, I suspect income investors won’t lose sleep. BP currently yields a forecast 5.1%. 

Hot market

York-based housebuilder Persimmon (LSE: PSN) also reports to the market next month. While we don’t know for sure what its half-year numbers on 18 August will be, we do know that UK property has been white-hot of late as more people show a desire to continue working from home.

I think the near-term performance of PSN will depend greatly on CEO Dean Finch’s commentary. Any suggestion that the withdrawal of stamp duty relief will impact trading at Persimmon could knock the share price.

Then again, it’s not as if Persimmon’s valuation looks stretched. As I type, the shares trade on a forecast P/E of 11. That still looks pretty cheap considering just how highly the company scores on quality-focused metrics. A temporary loss of momentum probably won’t bother dividend hunters either. Based on analyst projections, Persimmon offers a tempting 8% dividend yield. That’s among the biggest that one can find on the FTSE 100. 

Supercycle beneficiary

A final FTSE 100 stock I’ll be following in August is copper miner Antofagasta (LSE: ANTO). 

I’m not alone in being bullish on this company. Earlier this week, broker Peel Hunt upgraded the company based on its belief that supply of the red metal will remain restricted in 2022. This should keep copper prices high, boosting profits at ANTO. Looking further ahead, a mooted commodity ‘super cycle’ brought about by the green revolution could bring forth a raft of new investors.

To be clear, this is still risky stuff. Demand for metals such as copper is often correlated to perceptions of global economic health — clearly beyond ANTO’s control. As this month’s update showed, production is also variable and can be affected by weather as much as well as grades and recovery rates. This may help explain why shares have lost momentum over recent months.

All that said, a P/E of 15 looks reasonable to me considering how financially sound ANTO appears to be. 

Interim numbers are due on 19 August.

The post BP isn’t the only FTSE 100 stock I’ll be watching in August appeared first on The Motley Fool UK.

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Paul Summers 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.