Before the coronavirus crisis emerged, many housebuilders were offering generous dividend yields. In most cases these were backed by very robust balance sheets and therefore looked well underpinned.
However, that has not spared investors in the sector from the kind of dividend cancellations and deferrals seen elsewhere as companies look to give themselves the best chance of getting through the massive current disruption to their operations.
Today, Persimmon (PSN) and Bellway (BWY) became the latest housebuilders to take action on their payouts.
Persimmon said it had scrapped one planned dividend payment and postponed another as it braces for a fall in home completions due to the spreading coronavirus. Notably despite conflicting advice on whether construction work should continue during the UK’s lockdown, the company is ceasing all but essential activities like completing partially built homes.
CONSERVING CASH
Persimmon said it had cancelled a proposed 125p per share interim dividend and would postpone a proposed final dividend payment of 110p per share. This will conserve £750m of cash.
Persimmon said it entered the current year with a strong balance sheet including cash holdings of £844m, land creditors of £435m and 'industry leading' land holdings of 93,246 plots owned and under control.
'Despite this encouraging start to the financial year we are preparing for a significant delay in the timing of legal completions, a rise in cancellation rates and a material slowdown in new sales, the extent and duration of which is uncertain,' the company said.
Bellway said the decision to pay an interim dividend would be postponed until later in the calendar year, when there was more certainty regarding the economic outlook.
The company also announced that for the six months ended 31 March 2020, pre-tax profit fell 7% to £291.8m as revenue rose 3.6% to £1.54bn. The rise in revenue was boosted by a 6.3% rise in housing completions to a record 5,321 homes. The operating margin fell to 19.3% from 21.5%, in line with expectations.
