Five of the U.K.'s biggest housebuilders announced bumper
payouts to shareholders this week as they posted sizeable profit
increases boosted by government subsidies for mortgages that stoked
demand for new homes.
Barratt Developments PLC (BDEV.LN) Thursday announced an interim
dividend of 3.2 pence, starting a program of payments covered three
times by earnings a share two years ahead of schedule, while Redrow
PLC's (RDW.LN) one pence payment was its first in six years. Both
companies' pretax profits more than doubled in the six months to
Dec. 31 over the year-earlier period.
Earlier this week, Bovis Homes Group PLC (BVS.LN) Monday raised
its full-year dividend 50% to 13.5 pence. Persimmon PLC (PSN.LN)
said Tuesday it will pay 70 pence to shareholders this year, having
earlier budgeted for a 10 pence payout. They posted gains of 48%
and 49%, respectively, for full-year pretax profit in 2013.
Several factors have made the U.K's recent property boom very
profitable for major builders. Markets were picking up before the
U.K. Government announced its Help-to-Buy program of equity loans
and mortgage guarantees, but the incentives increased demand and
let builders drop their own shared-equity offerings and other
sweeteners, boosting margins. Banks cautious about their balance
sheets are reluctant to lend to small builders, who have provided
little competition for land.
Taylor Wimpey PLC (TW.LN) Wednesday pledged to pay at least 250
million pounds ($415.7 million) to shareholders over the next two
years as it also posted a 48% gain in pretax profit for the full
year.
Chief Executive Pete Redfern said in an interview with Dow Jones
Newswires Wednesday that the company expects to pay out GBP200
million a year for the foreseeable future, "unless things change
dramatically."
For Taylor Wimpey, the shift to bigger payments to shareholders
comes as expenditure on land levels off. The company sold 11,700
homes last year; as it slows the pace with which it replaces the
plots it builds on, sales will eventually stabilize around 14,000,
Mr. Redfern said.
"Pushing significantly beyond that, unless the planning
environment and availability of land changed, would mean we would
have to compromise" on financial returns and the desirability of
the locations the company is operating in, Mr. Redfern said.
In the past year, the shares of the five companies mentioned in
this article have risen between 40%, Bovis, and 79%, Barratt.
Except for Persimmon, the biggest by market value, they are
constituents of the FTSE 250 index, which gained 5.5% in the
period.
Write to Ed Ballard at ed.ballard@wsj.com
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