Even with a cut, the Persimmon dividend forecast looks good to me!

House builder persimmon (LSE: PSN) has been an attractive income segment in recent years. The return is 16%. But with the card cut, what is Persimmon’s dividend forecast? Do stocks deserve a place in my portfolio?

In the short term, I expect yields to decline.

The company announced in November that there would be no special dividend last year. Last year, a special dividend of £1.15 per share accounted for 47% of total shareholder payouts. If the builder holds the company’s ordinary payout, Persimmon’s dividend forecast will be at £1.25 per share. This would be 8.6% of the current share price. That is also below 16%, but still attractive to me.

However, it is not clear that the regular dividend will really hold. As part of the company’s new capital allocation policy, ordinary dividends “will be set at a level that is also guaranteed by post-tax profits“. The policy will start from the 2022 dividend, which will be announced next month.

This does not mean a reduction in regular dividends, though. Last year, for example, post-tax profits came in at £787m and ordinary dividends cost the company just under £400m. So, unless profits fall, Persimmon can maintain last year’s payout. The new policy could mean an increase in cards.

When considering the combined total of regular and special dividends, however, I expect the 2022 payout to show a cut from the previous year.

Persimmon’s share price changes

What about the next five to ten years?

The new dividend policy is all about how Persimmon distributes excess cash to shareholders. It doesn’t change the company’s ability to generate that cash in the first place.

Historically, companies have paid out a lot of money in dividends. In the new policy, expect to continue the past policy of distributing excess capital to shareholders from time to time, through share buyback programs or special dividends. I expect that, in years of strong business performance, we may see Persimmon pay a special dividend again.

With the dependent distribution being “well covered”, there may be more variation in Persimmon’s regular dividend than before. If earnings are low, regular dividends can be cut or canceled altogether.

My movement

Currently, Persimmon is doing well and is trading at a low price-to-earnings ratio of just 6.

The company has a strong brand, a business model that usually generates high profit margins and profits from a market where there is limited supply. All of these factors could help earnings in the coming years, possibly supporting shareholder payouts.

But there is also the risk that falling house prices could hurt income. This could lead to bad news for shareholder payouts. Although Persimmon’s dividend forecast intrigued me, I’m waiting to see what happens in the housing market in the coming months before making the stock.