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The Taylor Wimpey (LSE:TW.) share value has been an enormous disappointment to me, plunging 38% within the final 12 months. That wasn’t what I anticipated after I added it to my Self-Invested Private Pension (SIPP) a few years in the past.
On the time, the shares seemed low-cost, buying and selling on a price-to-earnings ratio of round seven and providing a 7%-8% dividend yield. I believed I used to be locking in nice worth from one of the vital dependable revenue shares on the FTSE 100.
The inventory jumped quickly after I purchased it however the enjoyable didn’t final. Sticky inflation, larger rates of interest, the hike to employer’s Nationwide Insurance coverage and the cladding disaster mixed to hit the sector exhausting. Taylor Wimpey’s complete cladding remediation invoice has now reached £435m, together with a £222m cost within the first half of 2025 for brand spanking new cavity barrier and fireplace security defects.
Constructing by the cycle
Newest outcomes, revealed on 1 October, have been sturdier than the share value implies. Working revenue edged up barely, from £416m to £424m. The order e-book was flat at £2.12bn although.
At at the moment’s value of round 102p, Taylor Wimpey shares nonetheless commerce at roughly half their 2015 degree and the group has slipped into the FTSE 250. On the plus aspect, the dividend yield’s climbed to an eye-popping 9.27%, and the valuation appears undemanding with a P/E of 12.3, beneath the truthful worth determine of 15.
A excessive yield and low valuation – what’s to not like? Drawback is, I mentioned that two years in the past, and to date I’m solely up a number of proportion factors, with dividends reinvested.
Falling rates of interest would assist, however the Financial institution of England stays cautious with inflation nonetheless sticky. For now, buyers may have to carry their nerve and anticipate sentiment to show.
Coverage shifts and planning hurdles
The federal government needs to hurry up housebuilding by reforming planning guidelines, which could enhance exercise and completions. But it surely has additionally threatened to penalise builders who sit on land banks, forcing them to fulfill supply timetables and file annual progress stories. That would add price and complexity.
Nonetheless, Taylor Wimpey stays a well-run builder, with a robust stability sheet and constant money era. If housing demand recovers, it ought to profit. Sadly, because the UK financial system slows, that might take time.
FTSE 100 restoration play
I averaged down on my holding a few months in the past and I’m contemplating doing so once more. At this degree, I believe it’s nicely price shopping for for the revenue alone. The board did reduce shareholder payouts by 1.25% in 2024, and one other small reduce’s probably. However the revenue ought to nonetheless stay tremendous excessive.
Dealer stories suggests we may very well be in for some pleasure. One-year consensus forecasts counsel the shares might soar 30% in a 12 months to simply over 132p. Nothing’s assured, but it surely echoes my view that Taylor Wimpey has sensible restoration potential.
Investing in shares all the time brings uncertainty, which is why I’ve constructed a balanced portfolio of round 15 completely different FTSE 100 shares, with various ranges of revenue and progress potential. I nonetheless consider Taylor Wimpey is price contemplating at the moment, and though I’ve an enormous stake, I plan to purchase a bit of extra. I simply can’t resist that revenue.
