Those looking for a chunky second income have historically turned to the UK construction sector for healthy dividends. Thanks to their strong cash flows and robust balance sheets, many companies in the industry have earned a reputation for paying generous levels of passive income.
But the UK’s housebuilders have struggled since the pandemic, with dividends being cut. However, are things about to get better? In particular, could Persimmon (LSE:PSN) be an excellent dividend stock for income investors to consider? Let’s see.
Then and now
As recently as its 2022 financial year, the housebuilder returned 235p a share to shareholders. In 2025, it declared 60p. This includes a final payout of 40p, which is due in July.
If this was repeated for 2026, based on a current (7 June) share price of 1,085p, it means 1,668 shares costing £18,097.80 would be needed to produce a second income of £1,000.80.
But the group’s most recent (30 April) trading update was upbeat. It said the year had started well with “an improved private sales rate and an increase in average selling prices”. At £2.46bn, its order book was 7% higher than at the same time a year earlier.
This suggests its profit could be higher than in 2025. Indeed, analysts’ consensus is for earning per share (EPS) to be 4.3% better in 2026. This is expected to result in an increased dividend of 65.57p (70% of earnings). If these forecasts prove to be correct, it means an investment of £16,557.10 (1,526 shares) would be needed to provide an income of £1,000.60.
And the position is expected to improve further in 2027. A dividend of 72.46p is forecast. This implies a forward yield of 6.8%.
What does this mean?
These forecasts suggest that someone investing £10,003.70 today (922 shares) could earn £1,641.12 in dividends — 178.03p a share (40p + 65.57p + 72.46p) — between now and July 2028. Looking at it another way, it means 16.4% of the initial investment could be recouped from dividends alone.
However, we should be cautious. As Persimmon has proven in recent years, dividends are never guaranteed. And although the conflict in Iran hasn’t had a material impact on the group so far this year, it warns: “We are mindful of its potential impact, including on consumer confidence, and there are early signs of increased inflationary pressure”.
Specifically, if interest rates stay higher for longer, the demand for new houses is likely to be affected.
But at the moment, the group appears to be going in the right direction. It has nearly 85,000 plots of land on which to build. And despite the post-Covid slump in the housing market, its balance sheet remains debt-free.
Encouragingly, its non-private business is proving resilient. The group’s described its interactions with institutional customers in both the affordable and build-to-rent sectors as “positive”.
An improving picture?
And in my opinion, if sentiment continues to improve, the dividend will be higher than that forecast. Due to its strong balance sheet and limited capital expenditure requirements, the group has historically returned nearly all of its earnings to shareholders. For example, in 2022, it paid a dividend equivalent to 95.8% of diluted EPS.
Personally, I think the stock’s worth considering by income investors, especially as Persimmon’s share price is currently 30% below its 52-week high.
Should you invest £5,000 in Persimmon Plc right now?
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James Beard owns shares in Persimmon plc.
