Today’s warning from Persimmon on the housing market feels like it has been in the post for months.
Housebuilders enjoyed a sugar rush driven by goodies like pent-up demand, appetite for extra space from people spending more time working at home and a stamp duty holiday, yet an inevitable crash has followed.
AJ Bell’s Russ Mould said: “Cost-of-living pressures have been exacerbated by soaring mortgage rates such that house sales are slowing down and prices look set to come down too. This will expose the profitability of Persimmon and its peers given they are subject to the higher cost of raw materials and labour.
“The end of the Help to Buy scheme is another reason why it is unsurprising Persimmon is unwilling to commit to guidance for 2023, beyond making sure everybody is very clear it won’t be as good as 2022.
“Against this backdrop Persimmon had no choice but to look at a change to its dividend policy, with the company relying on significant cash reserves to pay the dividend in recent years rather than funding it entirely out of its free cash flow.
“A double-digit dividend yield was the market ringing the alarm bell over the fate of the dividend and a hefty cut can’t be ruled out as Persimmon looks to cut its cloth to fit more straitened circumstances.”