What’s better than a high-yielding income stock? One that also happens to be dirt cheap. FTSE 100 housebuilder Persimmon‘s (LS: PSN) both. So is it worth considering today?
If you know anything about housebuilding sector, you’ll know it’s had a terrible decade. The seeds of negativity were set after the financial crisis, when interest rates were slashed almost to zero and held there for years. That drove house prices to unaffordable levels, squeezing many first-time buyers out of the market.
Housebuilders were then on the frontline of a string of shocks, starting with Brexit in 2016. The post-pandemic inflationary crisis, which sent mortgage rates to the skies, and the scrapping of the Help to Buy scheme in 2023 further squeezed young buyers.
Why has this share done so badly?
As if that wasn’t enough, hikes to Employer’s National Insurance and the Minimum Wage drove up labour costs, and the post-Grenfell cladding forced builders to shell out hundreds of millions in fire safety measures.
There was a brief respite as the Covid ‘race for space’ and stamp duty cuts briefly fired up house prices. The Persimmon share price peaked at 3,160p in May 2021. Today, it’s around 1,134p. That’s a peak-to-trough drop of almost 65%. It may also be a buying opportunity.
Plenty of investors will baulk at buying such a troubled stock. They’re wise to be cautious. While it’s great to buy cheap shares, the recovery can take a lot longer than you might like. Persimmon, like the rest of the housebuilding sector, has been swimming against the tide for years.
I topped up my stake in FTSE 250 housebuilder Taylor Wimpey at the start of this year, because I expected the property market to go gangbusters as interest and mortgage rates continued to fall. The Iran war wrecked that. But there are signs that some kind of Middle East peace deal may hold, and oil supplies are getting through. The International Energy Agency has even talked of a glut in a year or two. Inflation could finally fall below 2% next year. A word of warning: I thought the same in January. Didn’t happen.
Is Persimmon still making money?
But I still think there’s an opportunity here for investors willing to accept some volatility. Despite its share price struggles, Persimmon remains a profitable company. Last year, pre-tax profits actually rose 13% to almost £446m, beating expectations of £440m.
That followed a couple of torrid years though:
- 2025 – £445.6m
- 2024 – £395.1m
- 2023 – £351.8m
- 2022 – £703.7m
- 2021 – £973.0m
Building houses in the UK isn’t easy, given planning restrictions, and despite government promises doesn’t look like getting any easier. The economy’s struggling, the cost-of-living crisis is far from over, and buyers are strapped for cash.
But with a forward price-to-earnings ratio of 11.1, and forecast yield of 5.51% for 2026, Persimmon’s starting to look exciting. I think it’s worth considering, for long-sighted investors who are up for the challenge.
Should you invest £5,000 in Persimmon Plc right now?
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Harvey Jones owns shares in Taylor Wimpey.
