Shares in Persimmon (PSN.L) surged on Tuesday after the housebuilder unveiled plans to return £1.9 billion of surplus cash to shareholders, while Britain’s FTSE 100 edged up as oil prices eased.
The UK index of blue-chip shares took on 0.29%, or 17 points, to 5,932 and the All Share index was 0.33%, or 10 points, higher at 3,074. See the FTSE’s performance and the index’s top winners and losers.
Persimmon dividend up 33%
Persimmon rocketed up 113p, or 18%, to 740p after the York-based group said it would hand over the money via dividends over nine and a half years, starting from 2013, throughout which time it would remain largely debt-free.
The firm posted slightly better-than-expected underlying pre-tax profits of £148.1 million, up 55% from the year before, citing its success in improving operating margins, investing in high-quality land and generating surplus cash to pay down debt.
It also declared a total dividend for 2011 of 10p, 33% higher than a year earlier.
Anthony Codling, analyst at Oriel Securities, reiterated a ‘buy’ recommendation for the stock following the results, saying the planned return of 620p per share over 10 years suggests a current annualised yield of almost 10%.
‘We expect that, as with the announcement of the Berkeley (BKGH.L) capital return, Persimmon’s shares will react positively to this news,’ he added.
ECB cash awaited
Meanwhile, Brent crude for delivery in March slipped 0.31% to $123.79 per barrel, retreating further from Friday’s 10-month high of $125.55 and easing fears of that energy costs will derail the global recovery.
And Bill O'Neill, chief investment officer, Merrill Lynch Wealth Management, EMEA, pointed out in regard to US equities that while crude prices might weigh on sectors linked to disposable income, energy stocks could gain.
‘Were an oil price spike to occur, policymakers would likely react to support growth,’ he said in a note. ‘Developed markets may engage in further quantitative easing. Emerging nations may loosen fiscal policy, introducing subsidies or, like China, reducing windfall taxes on energy producers.’
Elsewhere, stock markets in Europe shrugged off a downgrade of Greece's credit rating to 'selective default' by Standard & Poor's last night, saying the move was expected as the country's debt was restructured. Attention was focused on what is expected to be a second offer of cheap three-year loans from the European Central Bank: Germany’s DAX index strengthened 0.42% to 6,878, France's CAC 40 index rose 0.47% to 3,458, and the FTSEurofirst 300 index of top European shares climbed 0.5% to 1,078.
GKN pulls back
GKN (GKN.L), a member of Citywire Top Stocks®, was the biggest faller on the index, dropping 9p to 224p to end an advance of 27% by the shares in the year to date, despite better-than-expected results from the car and plane parts maker.
Essar Energy (ESSR.L) also fared poorly, falling 3p to hit an all-time low of 104p, after Goldman Sachs downgraded the India-focused group to ‘neutral’ from ‘buy’, and Deutsche Bank cut its price target to 250p from 360p.