Why the Taylor Wimpey share price rose 10% in September

Taylor Wimpey (LON: TW) shares had an upbeat month in September, and there’s an 11% dividend on the cards. I rate that a buy.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Looking at the 10.6% rise in the Taylor Wimpey (LSE: TW) share price in September, and looking further back over the past 12 months, it seems the stock is being pulled in two directions by two different sentiments — and Brexit has a lot to do with it.

Rocky road

Then, when our Brexit negotiations were looking glum in early October, the Taylor Wimpey price dipped again and lost all of last month’s gain. But positive emanations on Friday resulted in a 10% jump and got us pretty much back to where September ended.

It’s been like that all year, with optimistic spikes alternating with pessimistic dips. Over 12 months, the Taylor Wimpey share price has actually been pretty flat overall, with a 1% gain (against a 2.5% rise in the FTSE 100). But, in between, the price has gyrated between 128p and 192p. There have to be less traumatic ways of breaking even than that.

Pessimism

The negativity just has to be down to the fears that a no-deal Brexit will hammer the housing market, but what effect could it really have? Accountants KPMG have predicted a probable house price fall of 6% in the event of a no-deal Brexit (but have suggested the drop could be as much as 20% in the worst case). The Office for Budget Responsibility reckons on a 10% fall by the middle of 2021.

House prices are slowing, with the Halifax earlier this month saying price growth has slowed to its lowest level in six years, with just a 1.1% year-on-year rise to August. That’s below the rate of inflation, but I’m really not convinced it’s anything to worry about. Many observers have been predicting a correction of some degree as an expected outcome of the rapid pace of house price growth so far this century. House prices can’t keep outstripping wage growth for ever.

So what?

Any thought that housebuilders need rising prices in order to keep making profits is simply false. Building land prices tend to echo house prices, and the demand for the two generally goes hand in hand. Where slowing demand will hurt is in actual sales volumes, but we still suffer from a chronic housing shortage in the UK — and no flavour of Brexit is going to change that.

And whatever pressure Brexit might be putting on the housing market, it doesn’t seen to be affecting Taylor Wimpey yet. With the firm’s first-half results, released 31 July, CEO Pete Redfern said: “Despite wider political uncertainty, conditions for the housing market continue to be supportive with good affordability and access to finance. We have not seen any meaningful change in customer confidence, with positive underlying metrics and forward indicators.”

Top dividends

Completions in the half rose to 6,541, from 6,497 a year previously, though pre-tax profit dipped a little to £299.8m, from £301m. The company had £392m net cash on its books, and lifted its interim dividend by 57%. With a special dividend of approximately 11p per share, 2020 is expected to deliver around £610m in dividends, which is about 18.6p per share. On today’s 161p share price, that’s a yield of 11.5%.

The gloom has put Taylor Wimpey shares on P/E multiples of around eight. That’s screaming “buy” to me.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft 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.

More on Investing Articles

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

How I’d invest my first £20k ISA to target £4,900 a year from dividend shares

Looking for dividend shares in a new Stocks and Shares ISA, and want diversification too? Here's how I'd go about…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »