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Are house building share dividends set to disappear?

In the week that Bovis Homes announced that it would be dispensing with shareholder dividends in the short term there is concern that this could be replicated amongst others in the housebuilding sector. While it does make sense for housebuilders to retain as much cash as possible as they try to reposition themselves in what is a very very difficult marketplace, many shareholders depend upon their share dividends to get by.

While housebuilding is the sector which has been in the forefront of the economic turmoil in the UK, as well as a UK banks, many are surprised that the dividend for Bovis Homes has been withdrawn entirely rather than just severely reduced. The company, like many others in the sector, has a mountain of debt and with business transaction levels at record lows, and unlikely to increase in the short to medium term, they did need to take evasive action.

Analysts will now need to go back to the drawing board for their projections for the sector over the coming months and years as well as their appeal to shareholders in the short term. Whether the likes of Bovis Homes has been placed under pressure by its lenders or taken a sensible action by itself is unknown but either way shareholders will see a significant reduction in their income.

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