The UK’s biggest housebuilder Barratt Developments (BDEV) is rewarding shareholders with a 21.7% hike in its dividend from 6p to 7.3p in the half year to 31 December.
Investors are won over as the stock is up 2% to 525.5p, although this is not the only good news as Barratt has delivered approximately a 9% increase in pre-tax profit from £295m to £321m.
VOLUMES DOWN
This is despite the housebuilder building 5.8% less homes over the period.
Pre-tax profit may have bested expectations but stockbroker Liberum analyst Charlie Campbell is not a fan. He reiterates his ‘sell’ recommendation, warning Barratt is ‘relatively more sensitive’ to falling house prices, compared to other housebuilders.
LONDON RISK
Davy Research analyst Colin Sheridan highlights that over the next two years £400m should be returned to shareholders through special and ordinary dividends, which is 10% ahead of his previous forecasts.
He is neutral on the stock though as London presents challenges to the company achieving its 20% gross margin target (the difference between revenue and cost of goods sold).
Shares reported in November that the London market was holding Barratt back, so this shouldn't come as a surprise.
