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There has been plenty of volatility for UK stocks in recent weeks as investors digest data from around the world. These two UK stocks have seen their share prices fall over the past year, but have still performed well.
As a result, the dividend is highly inflated. But it’s often worth cautioning against large dividends. So let’s take a closer look at these companies and see if they are right for my portfolio.
Persimmon
Persimmon (LSE: PSN ) has the largest dividend yield on . FTSE 100It is currently at a high level of 16.5%. The homebuilder has been delivering a very good dividend yield in the past but this has increased significantly as the share price has gone down.
The stock is down 48 percent over the past 12 months, despite homebuilders posting record profits over that period. Persimmon missed its H1 targets after the completion fell through, but set its target for the year.
The average selling price for a new house built by the company rose by £9,400 year-on-year, reaching £246,000 in half the period. Private sales were 8% higher than pre-pandemic levels, although they were up 7% on the year.
However, there are many downsides to home builders’ rising interest rates and rising cost of living. But it’s worth noting that persimmons are trading at their lowest level in five years — even lower than when the outbreak began.
And that’s why I just yelled at this organization. Yes, there are some short-term issues, and falling demand for housing can cause prices to fall and profits to fall. And that 16.5% profit margin seems unsustainable. But even if it halves to 8 percent, it will double the index average.
In the long term, I’m sure demand for accommodation will bounce back, and so will Persimmon’s share price. I own this stock but would buy more at the current price.
Legal and general
Legal and general (LSE:LGEN) shares are lower than Persimmon – 7% per year. And this has served to increase the dividend rate, which is currently set at 9.11%.
A falling stock price indicates a pretty positive performance. Legal & General recently announced an 8% rise in interim profit in the six months to the end of June.
And despite the negative economic environment, there are signs that the business could continue to perform strongly in 2023. For one, life insurers often fare better when interest rates rise because they have to set aside less capital now to pay future payments.
And importantly, as highlighted Bank of America, the sizeable legal and general division seems safe. Last year’s dividend payout ratio – a measure of how often a company can pay dividends from net income – was 1.85. That’s pretty healthy, though a figure closer to 2.0 is stronger.
As finance tightens, a recession reduces demand for financial services products. But in the long run, Legal & General is a household name with a strong business model that should succeed. And that’s why I already bought Legal & General for my own portfolio. Again, I want to buy more with my spare cash.