If I’d invested £2,000 in Persimmon shares 5 years ago, here’s how much I’d have now

Has the income from bumper dividends worked to save the day for investors in Persimmon shares over the past half-decade?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

pensive bearded business man sitting on chair looking out of the window

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Investors in Persimmon (LSE: PSN) shares have endured a bumpy ride over the past five years. The house builder’s volatile earnings record has worked with seesawing sentiment to produce some big swings for the stock.

But the dividend payments have been pretty good over the period. So has income from those shareholder payments saved the day for the company’s shareholders? To find out, let’s look at the five-year total returns delivered by the stock.

Should you invest £1,000 in Persimmon right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Persimmon made the list?

See the 6 stocks

Created with Highcharts 11.4.3Persimmon Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

A losing investment

Investors could have bought some of the shares five years ago for about 2,554p each and it’s been higher since. But today the stock is changing hands for around 1,261p. So that’s a loss of 1,293p per share over the period.

However, shareholders will have collected dividends worth 925p per share over the past five years. So that can be added back to give a net figure of a negative 368p. And that works out as an overall loss on the investment of around 14.4%.

Therefore, a £2,000 investment in Persimmon shares five years ago would now be worth approximately £1,710. Although the exact sum realisable would depend on the effects of transaction costs when buying and selling the shares. 

Persimmon’s big yield

But dividends did not ensure a positive outcome. Although they did mitigate the loss an investor would have otherwise suffered over the period.

Nevertheless, Persimmon’s big dividend yield over most of the past five years has not worked to enrich the company’s shareholders. And the reason for that appears to be the huge cyclicality present in the house building sector. Cyclicality in a business can deliver big gains for investors on the way up and take away just as fast on the way back down.

And that’s why I’d question the wisdom in attempting a long-term investment in any cyclical stock. To me, timing is important when it comes to the cyclicals. 

And I learnt a lot about that from legendary investor Peter Lynch. He achieved outstanding investment success managing Fidelity’s Magellan fund between 1977 and 1990. The two Lynch books I read are One Up on Wall Street and Beating the Street.

Meanwhile, on 1 March, Persimmon delivered its full-year results report for 2022. And chief executive Dean Finch spoke of caution ahead. He described the current new homes market as “uncertain”. And lower sales rates over the past five months means 2023 completions will be “down markedly”.

City analysts have pencilled in a plunge in earnings of around 36% for 2023. And it’s unclear how much pain is already priced-in with the stock at its current level. But on a brighter note, those same analysts expect the dividend to increase by nearly 23% in 2024. And that puts the forward-looking dividend yield at a bumper 7.7% now.

But there may be an even bigger investment opportunity that’s caught my eye:

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kevin Godbold has no position in any of the shares mentioned. 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.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Calendar showing the date of 5th April on desk in a house
Investing Articles

Here’s how a £20k ISA could produce £1,580 of passive income in the next year

A Stocks and Shares ISA stuffed with dividend shares can be a lucrative source of passive income. Christopher Ruane explains…

Read more »

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »