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After another dive, do I sell my Persimmon shares?

Young Caucasian man making doubtful face at camera
Image source: Getty Images

The past three years have been a rocky ride for owners of Persimmon (LSE: PSN) shares. Having hit a record high in early 2020, they’ve crashed, soared and then crashed again. Alas, the share price plunged again on Wednesday after the housebuilder unveiled its full-year results.

Persimmon builds homes

One of the UK’s leading housebuilders, York-based Persimmon was founded in 1972. Funny fact: it’s named after a prize-winning racehorse owned by the Prince of Wales (later King Edward VII) and not the reddish-orange fruit.

Trading under the Persimmon Homes, Charles Church and Westbury Partnerships brands, this FTSE 100 firm has almost 5,200 employees and sold 14,868 new homes in 2022.

Riding a roller coaster

At its all-time high, the share price hit 3,328p on 20 February 2020. But then Covid-19 sent global stock markets crashing, with Persimmon shares duly following suit.

But this beaten-down property stock came roaring back, closing at 3,210p on 9 April 2021. Unfortunately, the shares have fallen steeply pretty much ever since. Here’s how they’ve performed over six timescales:

Current price

1323.5p

One day

-8.9%

Five days

-6.6%

One month

-6.1%

Six months

-8.2%

One year

-43.0%

Five years

-48.8%

At the current share price, Persimmon is valued at £4.2bn. As my table shows, the stock is down over all six periods ranging from one day to five years. And this business is worth almost half of what it was one year and five years ago.

I’ve been riding this roller coaster since 26 July last year, when my wife bought Persimmon stock for our family portfolio at 1,856p. Based on the above share price, we’ve lost 28.7% of our investment in under eight months. Ouch.

Get ready for a rough 2023

Thanks to soaring consumer prices, sky-high energy bills and rising interest rates, the UK housing market is set to have a troubled 2023.

Already, Nationwide has reported a 1.1% fall in UK house prices in the year to end-February. That’s the biggest fall since November 2012. And that may be the start of what could be an unpleasant 2023-24 for UK property firms.

For its 2021 financial year, Persimmon shareholders received a total of 225p per share in cash dividends. For 2022, this has been slashed to just 60p a share, with 2023’s dividend set to be the same.

Shares on the chopping block?

My wife and I bought Persimmon shares for their high dividend yield. This has now crashed to 4.5% a year — hardly more than than the wider FTSE 100’s cash yield.

Also, Persimmon warned that its new-home sales could crash by 40% this year, plunging to around 8,000 transactions. In other words, it could be a long while before sales turn the corner and profits get back to 2022’s £1bn+.

In summary, things look gloomy for Persimmon right now. Yet the company is optimistic that sales will rebound in 2024, plus the group has a solid balance sheet, including net cash.

To be honest, I can’t decide whether to dump our Persimmon shares or hold on. So I’ll leave this tricky decision to my wife, who may decide to cut our losses and move on!

The post After another dive, do I sell my Persimmon shares? appeared first on The Motley Fool UK.

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Cliff D’Arcy has an economic interest in Persimmon shares. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2023