Bellway (BWY)

[midgesgalore]

Company Preliminary Results, year ended 31 July 2020

https://www.investegate.co.uk/bellway-plc--bwy-/rns/preliminary-results/202010200700065399C/

Dividend payments resumed, with a Board proposal to pay a reduced final dividend of 50.0p per share (2019 - 100.0p). The Board expects to increase the quantum of future dividend payments over time, commensurate with the Group's recovery in earnings.

The proposed final dividend, subject to shareholder approval, will be paid on 8 January 2021 to all ordinary shareholders on the Register of Members on 27 November 2020. The ex-dividend date is 26 November 2020. At the record date for the final dividend for the year ended 31 July 2019, shares were held by the Bellway Employee Share Trust (1992) (the 'Trust') on which dividends had been waived.


It is my housebuilder pick unlike many here. They cancelled their July interim, like many others due to CV-19, which would have been in the order of 50p and have proposed a final for the year of 50p - about half what they would have normally paid for a final without the current mitigating circumstances.

At least, subject to shareholder approval, this is a third of the total 2019 annual dividend with a resolve to increase again.

midgesgalore

[funduffer]

I can't really understand why the housebuilders have reduced their dividends so drastically during the pandemic.

Their lockdown was relatively short, and the housing market has recovered very rapidly since.

I hope to see the other housebuilders resuming decent dividends from now on.

( I hold Vistry, not Bellway)

FD

[monabri]

I guess there is the possibility of Lockdown #2. Hence, caution w.r.t. the dividend level.

[Gengulphus]

I can't really understand why the housebuilders have reduced their dividends so drastically during the pandemic.

Their lockdown was relatively short, and the housing market has recovered very rapidly since.

Uncertainty and prudence. Uncertainty about how long they would be in lockdown, how much the change to socially-distanced working would cost them, whether there would be another lockdown that affected them, whether they would be able to sell the houses they were building and at what price, and probably quite a few other things I haven't thought of offhand. Not all of them at the same time, of course, but at any time during the pandemic so far, one or more of them have been very uncertain. In times of uncertainty, well-run companies like to prudently retain enough cash to cater for a worst-plausible-case outcome, or as close to that amount of cash as they can manage... And there are good reasons for that prudence, because running out of cash to meet their obligations is something that directors are legally obliged to deal with promptly, and the steps they can take to deal with it are generally decidedly bad news for the company and its shareholders.

Gengulphus

[starter]

On dividends I think there is also the feeling that they can get away with it if other companies (particularly direct competitors) are doing this.

Upper management will often see dividends as a cost of capital, and cutting dividends means cutting costs. Obviously it's something you want to avoid doing more than anyone else or you may lose your job, but if everyone else is doing it then this is a golden opportunity to give a decent cash flow.

[AsleepInYorkshire]

I can't really understand why the housebuilders have reduced their dividends so drastically during the pandemic.

Their lockdown was relatively short, and the housing market has recovered very rapidly since.

I hope to see the other housebuilders resuming decent dividends from now on.

( I hold Vistry, not Bellway)

FD

1. Liquidity protection
2. Protection against unknowns - many supply chains are still under-supplying due to C19
3. Retention of key personnel
4. Fear

AiY

[monabri]

Cost increases on raw materials due to scarcity of supply.
Brexit trade tariffs uncertainties
Labour availability.

[scrumpyjack]

Another factor is that some managements remember the 2008 crisis when many builders came very close to going bust (eg Barratt).
That must make them take a more cautious view this time and not let them become at the mercy of their bankers as they were then.

I think Barratt got hammered for hundreds of million in bankers fees etc last time!