Lennar Shares up after cutting dividend

Major home builders' stocks were trading slightly higher on Wednesday, swept up in a market surge after coordinated rate cuts by the Federal Reserve and other global central banks.

The Dow Jones U.S. Homebuilders index rose about 1 percent in morning trading, with Atlanta-based Beazer Homes USA Inc up about 5 percent at $5.02 and posting the strongest gains among the top 10 builders.

Lennar Corporation shares were up 2.8 percent at $10.74, a day after the No. 2 U.S. builder cut its dividend 75 percent to 4 cents per share.

"We concluded it is prudent to preserve cash to fund future operations and opportunities," Chief Executive Stuart Miller said in a statement.

UBS analyst David Goldberg also deemed the move a prudent one, writing in a client note that cash flow generation could slow further for builders in 2009.
In response to the deteriorating market, builders have shifted their focus from profit and growth to cash generation by ramping up incentives and selling the land and inventory they accumulated at peak prices during boom times.

D.R. Horton Inc the biggest U.S. builder, halved its dividend in May. Other builders may well need to follow suit, said Morningstar analyst Eric Landry.

"It's likely that these home builders are going to enter an even more difficult period in terms of cash generation," Landry said. "It's likely to a be a more difficult environment going forward."