Making knee-jerk decisions following new events can be expensive in the long term. It’s why I continue to hold Persimmon (LSE:PSN) shares in my portfolio. Want to know why?

Market slowdown

Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.
Warren Buffett

I was hoping 2026 would be a better year for housebuilder Persimmon. Receding inflation meant several crucial interest rate cuts were expected, stimulating housing market demand. It took less than two months for my hopes to fall apart.

Why? The market is already exhibiting a sharp slowdown due to the Middle East conflict. Halifax data shows annual house price growth halved in April from the previous month, to 0.4%. With concrete steps towards a US-Iran ceasefire remaining elusive, buying activity could remain subdued.

Keeping the faith

Yet I’m not walking away from Persimmon, even though the strong share price recovery I was expecting appears in tatters. Firstly, the homes market remains largely robust despite these fresh pressures, reflecting demand that continues to outstrip supply.

As Halifax notes,

while activity is likely to cool in the near term, the underlying picture remains one of relative stability, supported by wage growth that continues to outpace house price inflation.

Looking further out, the housebuilding sector still has explosive profits potential in my opinion. The UK needs at least 300,000 new homes a year to meet its rapidly growing population, according to industry forecasts. And Persimmon’s scale and focus on more affordable homes puts it in great shape to capitalise on this opportunity.

The FTSE 100 company is the country’s third-largest housebuilder by volume behind Barratt Redrow and Vistry. For 2026, it is planning to build between 12,000 and 12,500 new homes.

A dip buying opportunity?

Since 1 January, Persimmon’s share price has dived 17% in value to £11.32. Though the risks have risen, is it possible the market could have overreacted? I think it’s possible.

One reason is that the builder’s model could support strong sales even if the broader market slumps. As Hargreaves Lansdown notes,

since Persimmon’s houses are typically priced around 19% below the newbuild national average, sales tend to be more resilient in times of uncertainty

What’s more, Persimmon is one of the UK’s most vertically integrated housebuilders, manufacturing a significant share of the materials it uses like bricks, timber, and tiles. The result? It’s better protected from rising inflationary pressures, helping to protect margins.

In my view, recent share price weakness represents an attractive dip buying opportunity. Persimmon shares now trade on a price-to-book (P/B) ratio of 0.9, which is well below the 10-year average of 1.8. On balance, I think it’s one of the best FTSE 100 value shares to consider.

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If they want to be comfortable, they’ll need a lot more than that, as this table shows. 

The new State Pension, paid to those who retire from April 6, is worth at most £12,547. That’s below the bare minimum required. Which is why it’s essential to save under your own steam.

I think the Stocks and Shares ISA is one of the best ways of doing it.

How much income could I get from an ISA?

Right now, a popular choice for long-term ISA investors is to build a diversified spread of FTSE 100 shares offering both dividend income and growth. They can re-invest the dividends to turbo-charge their total return when working, then draw them as income in retirement. 

Now let’s say their portfolio generates an average yield of 5% a year. To hit that income target, they’d need £752,820, which is a lot of money. Let’s say somebody has 30 years before retirement. They’d need to tuck away £505 a month, assuming an average total return of 8% a year.

That takes dedication and commitment, but the rewards are huge.

So how can I get a high yield?

Today, an impressive 14 FTSE 100 stocks yield 5% or more, including housebuilder Persimmon (LSE: PSN). It’s forecast to yield 5.7% this year, rising towards 6.2% in 2027. That’s a terrific rate of income, but it isn’t all good news.

Recent years have been tough for housebuilders, as higher inflation, low affordability, the fire safety cladding scandal and end of the Help to Buy scheme squeeze sales and prices.

2026 looked promising with interest rates expected to fall, then came war in Iran. The oil spike’s now driving inflation back up, and mortgage rates could follow. The Persimmon share price is down 18% in the last year, and 66% over five. So why would anybody buy this stock today?

Buying beaten-down companies can be a winning strategy, as it allows investors to get in at a lower valuation and higher yield. However, patience is required. The UK economy’s struggling, and while the property market’s holding up, the UK’s troubles could last a while longer.

However, with a modest forward price-to-earnings ratio of 10.2, Persimmon investors are taking a position at a big discount. I think it’s worth considering for long-term investors up for the challenge. At some point, this stock could take off. Just don’t expect it to happen overnight.

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A Cash ISA is handy for short-term savings but the stock market is the way to build long-term wealth. Over the last decade, research body Investing Insiders found the average Cash ISA returned 4% a year. By contrast, the average Stocks and Shares ISA delivered 9.5%, with dividends reinvested.

How much do you need to make a million?

The difference magnifies over time, as my table shows. It assumes someone saves or invests £511 a month, which adds up to £6,132 a year.

It’s possible to contribute up to £20,000 to an ISA. Somebody who invested that and got an average return of 9.5% a year would hit millionaire status in less than 19 years. Right now, a popular choice for long-term ISA investors is to build a diversified spread of FTSE 100 shares offering both dividend income and growth. 

Many investors overlook the power of dividends. However, if you reinvest your them straight back into your portfolio, they turbocharge the overall return through the long-term compounding effect. Recent stock market volatility has driven up dividends yields. A notable example is house builder Persimmon (LSE: PSN).

The construction sector has been hit hard by the Iran conflict, as the rising oil price threatens to drive up inflation and interest rates. Lenders have been hiking mortgages, which could hit demand for new builds.

Should I take advantage of current market volatility?

Affordability is already stretched, especially for first-time buyers. Also, builders have also seen their costs rise, due to the cost-of-living crisis and increased employment taxes, further squeezing margins. Now things could get even tighter. The Persimmon share price is down 22% over the last year, and 67% over five years. That level of volatility will deter some investors, but it has two huge advantages for those considering the stock today.

First, the shares now look much better value, with a forward price-to-earnings ratio of just 10.2. That’s below Persimmon’s long-term average of 11.6. Second, the falling share price has driven up the yield. Persimmon is forecast to pay dividend income of 5.95% this year, rising to a stunning 6.46% next year.

Dividends aren’t guaranteed, and can be cut if Persimmon doesn’t generate enough cash to make them. That will get harder if the Middle East conflict intensifies. However, I think Persimmon is well worth considering with a long-term view, as part of a wider portfolio of FTSE 100 dividend and growth stocks. The housebuilder looks like an exciting opportunity, but I’ll be closely watching its dividend and growth prospects in the coming months.

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Let’s see.

Two alternative approaches

With a yield of 6.4%, a portfolio of dividend shares would need to be valued at £196,063 to pay £12,548 a year.

And while some investors like to focus on growth shares when building an investment portfolio, I believe it’s possible to establish an impressive nest egg using dividend shares.

However, the key is to reinvest those dividends. By doing this, gains will compound quickly.

How do the numbers stack up?

For example, let’s assume someone started with £10,000 of income stocks paying 6.4% a year. In year one, they would generate £640 of dividends. Assuming this amount was reinvested, £681 would be paid in year two. During the third year, the income produced would be £725. And so on. You get the picture.

After 25 years, the initial lump sum of £10,000 would grow to £47,516. That’s an amazing return from doing, literally, nothing.

However, it remains a long way short of our target of £196,063.

But if someone was able to supplement the up-front £10,000 with a monthly investment of £213.73, they would be able to build a portfolio worth £196,058.

At this point, they could change tactics and spend the dividends rather than reinvest them. A 6.4% yield on this sum would produce £12,548 a year. I think this would be a nice addition to the State Pension.

Building for the future

One of the FTSE 100’s ‘Lucky 13’ is Persimmon (LSE:PSN), the UK housebuilder. At the moment, it’s yielding 5.6%.

However, as a reminder that dividends don’t come with any guarantees, it had to cut its payout for its 2023 financial year by 66%. The following year it was reduced by 20%.

The fact that the stock’s still yielding over 5% is an illustration of how much its share price has fallen in recent years.

And if the conflict in the Middle East continues, there could be more bad news for shareholders to come. If inflation starts to pick up again it will increase construction costs, interest rates will rise, mortgages will become more expensive, and disposable incomes will be squeezed. Against this backdrop, Persimmon will see both its top and bottom lines affected.  

But I remain hopeful. It’s in everyone’s interest for the war to stop. And even the Bank of England, not known for its overly optimistic forecasts, believes the current ‘energy crisis’ is unlikely to see a return to post-pandemic levels of inflation.

Looking further ahead, the fundamentals of the UK housing market are likely to help Persimmon. Analysis by the Centre for Policy Studies reveals that there’s a shortage of 6.5m homes when compared to similar European countries. To close the gap, it’s estimated that 565,000 homes a year will be needed by 2040. Planning reforms will help.

This should help Persimmon build enough houses to enable it to raise its dividend once more. On this basis, I think it’s an excellent income stock to consider.

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Over the last year, the Persimmon share price plunged 24%. Over five years, it’s down a brutal 65%. If an investor had put £7,775 in Persimmon shares on 1 May 2021, they’d have picked up 248 shares at 3,132p each. Today, those shares are worth just 1,057p each, a meagre £2,621 in total. Our investor would be sitting on a paper loss of £5,154. However, new investors could potentially turn that nightmare to their advantage.

In practice, they wouldn’t have lost that much, as they’d have received dividends along the way. The board cut the dividend per share from 234p to 60p in 2022, and it’s been frozen at that level ever since. But our investor would have got about £1,100 worth of dividends, at a rough guess. If they’d reinvested them, they’d have picked up more stock at the lower price.

Is this FTSE 100 stock too exciting to ignore?

Persimmon isn’t the only housebuilder suffering today. They’re all struggling. Shares in the UK’s biggest builder of all, Barratt Redrow, are down 47% over one year, and 67% over five.

When the market cycle turns against a sector, there isn’t much companies can do about it. But there’s one thing investors can do, if they’re up for the challenge. And that’s take a position towards the bottom of the cycle, when the shares are cheap and the yield higher, then grit their teeth and wait for events to turn back in their favour. Do we have such an opportunity today with Persimmon? I think we might have.

Yesterday’s (30 April) trading update was way better than I’d have imagined. Average weekly net private sales rate rose 3% over the first four months of the year, while the order book climbed 5% to £2.5bn. Private average selling prices edged up 5% to £306,900. The board also confirmed full-year guidance, with underlying pre-tax profits up 4% to £462m.

It’s cheap, and just look at that yield

Now let’s assume the board holds the dividend at 60p in 2026 too. If it does, that’s a forward yield of 5.7%. Which is hugely tempting but of course there are risks. Yesterday, the Bank of England warned inflation could go as high as 6% if the Iran conflict drags on, while analysts are pricing in anything between three and six interest rates hikes. That could hit housebuyer demand, prices and revenues. Investors who buy today could be in for an anxious wait before Persimmon recovers. Yet the risks look priced in. Persimmon’s forward price-to-book ratio is now just 0.86. That’s well below its 10-year average of 1.83. 

When beaten-down shares recover, they often do it quickly. So it can pay to get in early. It certainly takes a brave investor to buy Persimmon today, but I still think it’s worth considering with a long-term view.

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Its balance sheet strength and surging earnings prospects support the sustainability of its payouts. And with the share price still depressed after the housing sector slump, the discount adds an extra layer of appeal.

So, how much could investors make from the shares?

How much in dividend income?

Persimmon’s current dividend yield is 5.4% — way higher than the FTSE 100’s present 3.1% average.

But dividends can change alongside share price movements and changes in annual payouts. In this case, analysts forecast its dividend yields will rise to 5.9% this year, 6.5% next year, and 7% in 2028.

So, a £20,000 holding in the stock could make £20,193 in dividends after 10 years and £142,330 after 30 years. This is based firstly on the forecast 6.5% dividend yield as an average. And secondly on the dividends being reinvested back into the stock to harness the turbocharging effect of ‘dividend compounding’.

The total value of the holding after 30 years could be £162,330, paying annual dividend income of £11,363 one day!

But what about the potential for share price gains too?

Profiting from the undervaluation?

One of the most widely used valuation tools is discounted cash flow (DCF). This estimates fair value by projecting future cash flows and discounting them back to the present. Greater uncertainty in those forecasts leads investors to demand higher returns, increasing the discount applied.

Analysts’ DCF models differ because they rely on different inputs. Using my own assumptions — including an 8.8% discount rate — Persimmon looks 58% undervalued at £11.11.

That suggests a fair value of £26.45, more than double where the shares trade today.

Because share prices tend to gravitate to their fair value over the long run, this could be an outstanding opportunity if those DCF assumptions hold good.

How does earnings growth look?

A risk for Persimmon is a further surge in the cost of living that prevents people from moving home. Another is any sustained rise in interest rates that would increase the cost of mortgages.

However, analysts forecast that Persimmon’s earnings will surge an average of 12.7% a year over the medium term, at minimum. And growth here supports gains in any firm’s share price and dividends over the long term.

These projections look well supported by its 2025 results, released on 10 March this year. Underlying operating profit soared 17% year on year to £472m. Meanwhile, revenue rose 17% to £3.75bn, highlighting its ability to grow volumes and pricing even in a still‑fragile housing market.

My investment view

I already own shares in Taylor Wimpey, so adding another housebuilder would unsettle the risk/reward balance of my portfolio.

But for investors without such a problem, I think Persimmon is a very intriguing prospect to research further. Its dividends are projected to rise strongly, as is its share price.

For me, other high-yield undervalued stocks in other sectors have recently caught my eye.

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Assembling a balanced portfolio of FTSE 100 companies inside a Stocks and Shares ISA can really pay off over time. Top UK blue-chips don’t just offer potential share price growth, but dividend income too. Here’s how. Let’s say an investor puts away £7.77 a day, which works out at £2,835 a year. Then increases their contributions by 5% a year thereafter.

See how fast your money could grow

Next, let’s assume the portfolio delivers an average compound return of 8% a year over 30 years. After three decades, their pot could have grown to around £585,897. That shows how the stock market can really put your money to work.

If the investor draws 5% of that portfolio as annual retirement income, they’d get a pretty fabulous £29,295 a year, while leaving most of their capital to grow. All of that starting from just £7.77 a day.

Of course, there are no guarantees. The portfolio could return less than 8% a year, or it could return more. And inflation would make it worth less too. But my point stands. It shows how steady, consistent investing over decades can translate into a significant income later in life.

The next question is where to invest. The FTSE 100 has been volatile recently, due to Iran tensions. That’s also created opportunities, notably in the housebuilding sector, amid concerns that higher oil prices will drive up interest rates and mortgage costs, and hit housing demand, sales and prices. They may also drive up the cost of materials and threaten fragile supply chains.

Persimmon shares boast a bumper 5%+ yield

Persimmon (LSE: PSN) has taken a beating as a result. Its share price is down around 13% over the last year and roughly 65% over five. That’s not an outlier, other housebuilders are suffering too.

The Persimmon share price has begun to stabilise in recent weeks. It now trades on a modest forward price-to-earnings ratio of 10.9, while the trailing dividend yield looks tempting at 5.4%. Recent dividend history has been bumpy though. The board slashed payouts by 75% in 2022, and it’s been frozen at 60p per share since. However, forecasts suggest the forward yield will climb to 5.65% this year, then 6.2% in 2027. No guarantees of course. Dividends could be cut if conditions deteriorate.

Should I buy go shopping for shares today?

I think Persimmon is still worth considering, but only with a long-term view. You should always balance any stock pick with a spread of shares across different sectors, offering both dividend income and growth. Never rely on a single industry or theme.

I can see plenty more brilliant bargains across the FTSE 100 today. Periods of uncertainty like today can create more attractive entry points for patient investors. And a higher potential passive income over time.

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With this in mind, I think it’s possible to build a pension pot worth a cool £175,000 using a handful of dividend shares. Let me explain.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Crunching the numbers

At an annual growth rate of 5%, someone investing £300 a month for 25 years could build a retirement pot worth £176,436. Obviously, investing more for longer is likely to yield a better return.

However, if someone was able to supplement their monthly investment with an initial lump sum of £20,000, the end result would be even more impressive. In this scenario, it would be possible to build a SIPP valued at £244,163 after 25 years. Again, this assumes a 5% return each year.

Whether an individual achieves a 5% return from growth shares — or reinvests the dividends from income stocks paying 5% — the end result will be the same.

And there are plenty of dividend-paying shares offering a similar return at the moment (19 April). The table below includes five from the FTSE 100, the UK’s premier index of listed companies.

I would have to do more research before deciding whether all of them are worth considering but, remember, this list of high-yielding shares isn’t exhaustive. There are plenty of others available at the moment.

The biggest and best?

In theory, FTSE 100 stocks are the most likely to deliver reliable earnings growth. In turn, this means their dividends are probably going to be more sustainable and predictable. Of course, there are never any guarantees when it comes to investing in the stock market. However, history suggests that the UK’s largest companies are among the world’s most reliable when it comes to dividends.

One stock in the table — and a company that has a long history of returning a large proportion of its earnings to shareholders — is Persimmon, the FTSE 100 housebuilder.

As a result of the pandemic and partly due to the impact that post-Covid construction cost inflation had on its margin, it had to cut its dividend. But based on amounts paid over the past 12 months, new investors could enjoy a yield of 5.2%.

Green shoots

Although the UK housing market has been in the doldrums lately, there are signs things are slowly recovering. The latest analysis from the Bank of England shows a steady improvement in mortgage approvals.

And until Iran was attacked, most economists were expecting the next movement in interest rates to be a downwards one. Assuming the current ceasefire in the Middle East holds, the market should continue its recovery, albeit after– perhaps — a temporary setback.

Presently, there’s a shortage of housing in the UK and recent changes to planning law should make it easier to address this under-supply. And with its houses being cheaper than most of its peers, Persimmon could be one of the biggest winners.

This should help the group expand once more and enable it to raise its dividend again. Its debt-free balance sheet also means it can use more of its operating cash to reward shareholders.

Personally, I think Persimmon’s worth considering as part of a diversified portfolio. In fact, I hold it in my own.

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However, by investing in the stock market, I reckon it’s still possible have a decent retirement, even for someone starting at 40 with nothing.

How?

Initially, I reckon it’s necessary to have a focus on growth shares. These are more likely to deliver the long-term gains necessary to build a decent investment pot.

Of course, a 6% return from a portfolio of growth shares is the same as a 6% return from a collection of income stocks (assuming the dividends are reinvested). But there are more companies that have consistently delivered share price growth of 6% a year than those whose shares are yielding 6%.

Once retirement age has been reached, I think it’s then more appropriate to have a portfolio biased towards dividend stocks. For most people in their golden years, I suspect income’s likely to be more important than capital growth. Growth shares tend to be more risky.

Don’t delay

Someone in their early 40s has to wait around 25 years before they receive the State Pension. The table below shows how an investment portfolio could grow over this period depending on how much is invested each month, assuming a 6% annual return.

A pensioner with a retirement pot of £339,790 could then earn, for example, 4.5% a year — £15,291 in cash terms — from dividend stocks. A full State Pension is currently £12,547 a year. Combined, these two income streams could give an annual income of £27,838, or £2,320 a month.

Something to consider

One dividend share I like is Persimmon (LSE:PSN). Because it has no debt on its balance sheet and it doesn’t need to spend huge amounts on capital items, it’s well placed to return the majority of its earnings to shareholders.

Indeed, a look back over the past five years shows a payout ratio of 87.5%. Just before the full impact of post-pandemic inflation was felt, the housebuilder paid dividends equal to 95% of is profit.

But we live in different times now. Facing higher construction costs and a drop in demand for new properties, the group cut its payout in 2023. This is a reminder that there can never be any guarantees when it comes to dividends.

Going in the right direction?

However, just before the conflict in the Middle East started, the group reported an improving outlook.

It’s hard to know whether recent events have fundamentally changed this assessment. However, it does appear likely that inflation is going to rise again and that interest rates will probably go up as a result. Worryingly, if the ceasefire doesn’t hold it could be a case of déjà vu and another dividend cut.

However, I’m confident that the world’s political leaders will soon see sense. Rising prices and higher interest rates are then likely to be a temporary blip.

If I’m right, Persimmon should continue its recovery. After all, there’s a chronic lack of housing in the country and the government’s keen to get Britain building again.

Coupled with its debt-free balance sheet, an abundance of land on which to build, and its 5.2% yield, I think Persimmon’s worth considering by investors today.  

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The group’s now (6 April) worth around a quarter less than when the conflict started. Does this mean it’s a bit of a bargain? Let’s take a closer look.

Double trouble

I suspect there are two potential issues playing on the minds of investors, both of which are related to inflation fears.

With the oil price continuing to rise, most economists are now predicting that interest rates will have to be increased. This is quite a turnaround. Just over a month ago, a cut was expected. And although sometimes described as a bit of a blunt instrument, the Bank of England has few levers that it can pull to combat rising inflation.

Increasing the base rate is likely to have the desired effect of slowing price rises. But it’s also probably going to reduce the demand for mortgages. In turn, this is likely to slow the sale of Persimmon’s properties. Of concern, UK gilt prices are now at levels last seen when Liz Truss was briefly Prime Minister. This matters because it’s used as the benchmark for pricing mortgages.

And if that wasn’t bad enough, rising energy prices could lead to higher construction costs. Post-pandemic inflation has already affected the housebuilder’s margin. In 2025, it reported around £28,000 less operating profit per completion than it did in 2022. This is despite being able to raise its average selling price (ASP) by nearly £30,000.

This is particularly disappointing given that the group’s financial and operating performance was starting to improve.

In 2025, it built 1,241 (11.6%) more properties than it did in 2024. And it increased its earnings per share by 9.3%. Baby steps, perhaps. But nonetheless, the green shoots of a recovery were starting to emerge.

What now?

Personally, I think the recent pullback in the group’s share price means the stock has plenty going for it. Indeed, I think it could be one to consider for patient long-term investors.

Fundamentally, the UK housing market continues to experience a shortage of properties. And the government’s emphasis on encouraging more houses to be built through a series of planning reforms can only be to Persimmon’s benefit.

Critically, the group’s ASP is lower than its FTSE 100 peers. And despite its recent troubles, the group remains debt-free. It also has a seven-year supply of plots on which to build, many of which have already secured planning permission.

The stock’s now trading around 30% below its 52-week high and around 50% lower than the consensus 12-month target of analysts.

Great for income

And then there’s the group’s dividend. Its 2025 payout of 60p means the stock’s now yielding 5.5%. And when things start to pick up, I think there’s plenty of scope to increase this further.

With no debt and limited capital expenditure requirements, the group’s historically distributed nearly all of its profit to shareholders. Last year, it adopted a more conservative approach returning around 60%.

Despite current concerns, I think Persimmon remains in good shape. I reckon it’s one of many UK shares that seem to be in bargain territory at the moment and are worth a look.

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