Buying 1,800 shares in this UK dividend stock could make £1.1k in passive income

A diversified income portfolio can be a great asset for an investor. I try to find sustainable dividend ideas that are generating good levels of passive income, which can help me for years to come. One caught my eye recently, which investors might want to consider.

Recent share price dip

I’m talking about Persimmon (LSE:PSN). The major UK homebuilder operates across the country, with the bulk of its income being generated by selling newly built homes. It currently has a dividend yield of 5.51% although the share price is down 33% in the last year.

Let’s start with the move lower price-wise. It’s been struggling recently with higher costs, which is impacting its overall profit margins. In the latest report, it said that “the pace of margin progression will be impacted by diminishing embedded build cost inflation, on-going affordability constraints and increased industry-wide costs“.

Aside from this, interest rates have stayed higher than expected in the UK. This means that mortgage rates have also remained elevated. Demand is more sensitive to rate moves, so consumer affordability issues reduce buyer demand or slow growth. That tends to weigh on valuations for housebuilders, as we can see here. And it remains an ongoing issue that’s likely to resurface at various times in the future.

Despite this, the fall in the stock has been met with the dividend per share being unchanged, so the yield has risen.

Dividend potential

Ignoring a brief period at the start of the pandemic, the company has paid out a consecutive dividend for almost a decade. This gives me confidence that even during this current tough patch, income will still be forthcoming. Given the attractive share price level at the moment, it provides an opportunity to lock in the price now, if this indeed does rally in the coming years.

I think this is likely, in part due to its solid financials. For example, in the half-year report for 2025, revenue increased by 14%, with pre-tax profit up 11% versus the same period last year. The dividend cover is 1.55. Any figure above one shows that the dividend is fully covered by the earnings per share. Therefore, I don’t see any concern of it being cut in the near future.

At a broader level, the Bank of England committee is expected to lower rates in Q4 and again next year, partly to help support the labour market. This should help lower mortgage rates. Historically, UK housebuilder shares tend to rally when rate expectations fall, as future volumes and margins look healthier.

The numbers

The current share price for Persimmon is 1,106p. This means that an investor could get paid just over 60p in income annually per share owned. Therefore, if they thought about buying 1,800 shares, this would potentially cost Â£19,908. In theory, over the coming year, this could pay out Â£1,097 in dividends.

The post Buying 1,800 shares in this UK dividend stock could make Â£1.1k in passive income appeared first on The Motley Fool UK.

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Jon Smith has no position in any of the shares mentioned. 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.