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A FTSE 100 share with a 7% yield to buy now

first_img Roland Head | Tuesday, 15th June, 2021 | More on: PSN 5 Stocks For Trying To Build Wealth After 50 A FTSE 100 share with a 7% yield to buy now Simply click below to discover how you can take advantage of this. FTSE 100 housebuilder Persimmon (LSE: PSN) said recently that sales this year are 23% ahead of 2020 levels, and 11% ahead of the same point in 2019. This share also offers a 7.6% dividend yield and has net cash of £850m on its balance sheet.Persimmon’s share price has risen by 36% over the last year, but I think this popular income stock remains an attractive buy.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Is the housing market about to crash?Housebuilders have performed well over the last decade, thanks to cheap mortgages and government measures, such as Help to Buy.Many people (including me) thought the pandemic might trigger a housing slump but, so far, this hasn’t happened. The government’s Stamp Duty holiday helped to encourage people to start moving again. It seems there’s still plenty of demand for new homes.Even so, I think there’s still a risk the housing market could slow this year. The Stamp Duty holiday ends this month and Help to Buy has already been scaled back. Since April, this loan scheme has only been available to first-time buyers.It’s too soon to know how these changes will affect demand for new homes. However, one point in Persimmon’s favour is that its homes are aimed at the mainstream market, not at luxury buyers. The firm’s average selling price of £252,000 is almost an exact match for the UK average house price of £242,832 (according to Nationwide).Why does this FTSE 100 share yield 7.7%?Most housebuilders have cut their dividends over the last year or so. Persimmon hasn’t. The company has resumed shareholder payouts at pre-pandemic levels, giving a forecast yield of 7.6% for 2021. It’s the highest-yielding UK housebuilder.The reason for this is that unlike most of its rivals, Persimmon plans to pay out virtually all of its earnings as dividends. This would normally ring an alarm bells with me. For most businesses, it’s not sustainable.However, years of high profitability have left Persimmon with a big net cash position and continuing strong cash generation. My analysis suggests that if the company can maintain its profits at current levels, the current payout may well be sustainable.Will the Persimmon share price rise?Persimmon is currently one of eight FTSE 100 shares with a dividend yield of 7%, or more. That yield is more than double the FTSE 100 average of 3%, so there’s clearly something unusual here.In my view, I think the market is pricing Persimmon to suggest its dividend may not rise much further. I think that’s probably true. The company is already paying out almost all of its profits as dividends. Profit growth is expected to slow over the next couple of years, so I don’t expect Persimmon’s dividend, or its share price, to rise very quickly from now on.Despite this, I’m still comfortable buying Persimmon shares. With a starting dividend yield of 7.6%, I don’t need much share price growth to achieve my target of a 10% annual return on my investment.I think this FTSE 100 share should continue to deliver big dividends for the foreseeable future. I’m happy to sit back and continue collecting the income. Markets around the world are reeling from the coronavirus pandemic…And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away. Image source: Getty Images See all posts by Roland Headcenter_img Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Click here to claim your free copy of this special investing report now! Roland Head owns shares of Persimmon. 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. Enter Your Email Address I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Our 6 ‘Best Buys Now’ Shareslast_img read more

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