What do people want from their investments? I want to generate long-term passive income for my retirement. And what better way than to invest in housing? It’s been in short supply for decades, and that shows no sign of changing. But my Persimmon (LSE: PSN) shares are not performing well.
In fact, the Persimmon share price has fallen nearly 50% over the past 12 months.
But you know what? It hasn’t affected my retirement income strategy one bit. And that’s because I’m still getting big dividend yields. If I don’t intend to sell my Persimmon shares for another decade or more, today’s price doesn’t matter, right?
Lower prices
Oh, wait, it does matter in one important way. And I have to bring up billionaire investor Warren Buffett. He famously asked: “If you plan to eat hamburgers throughout your life, should you wish for higher or lower prices for beef?“
I think the answer to that one is clear enough. But it also implies that, if I plan to buy dividend shares for the rest of my life, I should wish for lower share prices.
Buying money
When I buy Persimmon shares, I’m actually ‘buying money’. Specifically, for last year I bought myself 235p per share in dividend money. And the cheaper I can buy that money, the better my retirement plans are going to turn out.
Forecasts suggest a similar total dividend for the current year. So investors today can buy 235p for half the price of a year ago. Half-price money! That’s not something we see every day.
What am I missing?
There’s no such thing as free money, so what am I missing? Well, I’d have to have lived in a tunnel for the past year to not see the problems surrounding us. The cost of living is soaring. Interest rates are rising. And mortgages are getting more expensive.
Fears of a possible stock market crash are growing. And it all means Persimmon shares could fall even further. If we see a prolonged housing slowdown, they might remain in the dumps for a long time. And the dividend might even decline.
So far, the UK’s housebuilders have still been reporting strong business in the first half. But the economic squeeze is in its early days, and the second half might not look so good.
Straight ahead
But back to that tunnel I mentioned. I reckon a tunnel is a great place to invest from. It means we can focus on what really matters — the long-term destination. And we’re shielded from short-term distractions.
Warren Buffett thinks similarly. He said: “If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.“
I don’t care
So I’m not worried about what’s happening to Persimmon shares this year. The price will only matter when I come to sell, hopefully a long time from now.
In the meantime, I want to carry on buying cheap money. And that means I want more Persimmon shares while they’re down.