Shares in housebuilder Berkeley Group hit to a record high after it raised its dividend payout to shareholders, handing chairman Tony Pidgley a windfall of nearly £100m by 2021.
The company, which specialises in upmarket homes in the south-east and London, raised its already generous 10-year dividend payback to £16.34 a share from £13. This boosted the value of the programme, which was first announced in 2011, by £500m to £2.2bn.
It means that Pidgley, who owns a 4.5% stake in the housebuilder, will get a £98m dividend payout by 2021, a £20m increase. Managing director Rob Perrins is in line for a £24.5m payout.
Perrins said the housebuilder was still investing in London and not calling the top of the market. It made an average profit of £115,000 on each home built in the past six months.
Berkeley said £4.34 a share had already been paid, with the remaining £12 a share to be paid in annual dividends of £2 a share over the next six years.
Shares in Berkeley jumped more than 8% to £36.30 after the announcement on Friday, an all-time high.
Pidgley, who co-founded the housebuilder nearly 40 years ago and is known for his ability to read the housing market, is one of the wealthiest business executives in the UK with a fortune of more than £200m, according to the Sunday Times rich list. Berkeley awarded him a bumper cash-and-shares package of £23.3m last year, part of £42m of bonuses for the top five executives at the company.
The higher dividend return target of £16.34 a share by 2021 gives Berkeley’s management a bigger hurdle to overcome to trigger one of the biggest share bonus payouts in corporate history, and suggests the company is confident this can be achieved.
Berkeley’s top five executives, including Pidgley, could in the next six years receive share bonuses worth a combined £550m at Friday’s share price, if the dividend return target is met.
Adopted from children’s charity Barnardo’s at the age of four by Travellers, Pidgley spent his early years living in a disused railway carriage. When he left school at the age of 15, he was barely able to read and write. He set up a haulage business and sold it at the age of 20 before founding Berkeley, which floated on the stock market in 1985.
Berkeley said it was on track to deliver profits before tax of £2bn in the three years to April 2018. Adjusted pretax profits, excluding a one-off profit from the sale of ground rent assets last year, were up 10% to £242m in the six months to the end of October.
Berkeley sold 2,091 homes at an average selling price of £506,000 in the period. Over the last five years, Berkeley has built more than 17,750 new homes. Demand for new housing remains strong in London, it said.
The firm has been selected as the Greater London Authority’s preferred bidder for the 27 acre former Parcelforce site next to West Ham station in east London.
Mike van Dulken, head of research at Accendo Markets, said the reiterated profit forecast “is the cherry on the cake for loyal shareholders who recognise the value of the company’s focus on a uniquely strong London and the south east region supported to solid demand for premium priced luxury habitation in an area where land is at a premium and property prices continue to make record highs”.
Ian Forrest, analyst at The Share Centre, advised investors to buy Berkeley “due to the healthy and fairly secure dividend income, excellent prospects for housing demand in London and the south east, and a long track record of delivering for investors”.
He added: “After a strong rise in the share price after the general election we are advising investors to drip feed into the stock for now.”
