Taylor Wimpey (LSE: TW.) has been hit by rising interest rates this year, but the shares still picked up a few percent after H1 results were posted.
The stock is down 30% in the past five years though. So what did the update say? And are Taylor Wimpey shares still cheap?
Better than hoped for
Chief executive Jennie Daly spoke of “variable market conditions including substantially higher mortgage rates.” No surprise there.
But she went on to add that the firm “delivered… first half completions slightly ahead of expectations.”
Despite the tough market, Taylor Wimpey says it should still see full-year completions of 10,000-10,500 homes, at the upper end of previous hopes.
Profit and dividends
Operating profit is down 45%, but it’s still in profit. And if that’s the worst that happens when the firm has hit one of its worse periods in years, I’d call it resilient.
Adjusted earnings per share dropped 44% to 50p. But the interim dividend is up 3.7% to 4.79p per share.
That’s in line with the board’s policy “to return 7.5% of net assets annually“, and I find that a very interesting approach.
Most would pay a portion of earnings, not assets. And it says to me that Taylor Wimpey is very much focused on long-term returns, rather than taking it year by year.
Short-term risk
It does mean there’s some short-term risk. If we’re stuck with very high mortgage rates for the next six months, completion targets might not be hit.
And even if it’s not based on earnings, the dividend could still come under pressure.
That, I think, could knock the Taylor Wimpey share price back again.
Long-term benefit
When I talk of the long term, I mean two things. I only invest money in shares when I’m happy to commit for the next decade or more. But I also want companies that prioritise the long term.
So many, which should know better, seem more keen to pump up their latest quarter.
Outlook
At 31 July, the order book stood at £2,175m, which isn’t all that far behind the £2,892m at the same time a year ago.
Again, that looks good to me in such a tough year. But maybe the tough year is a help in one way? High mortgage rates make it hard for buyers, for sure.
But the 2023 house price fall is the biggest since 2009. Maybe people, at least those who can afford to, are willing to take on some extra short-term mortgage pain to get a new home at a better price?
Best buy?
Whatever 2023 brings, I reckon the new homes market could be one of the best cash cows we have in the years ahead. A chronic supply shortgage should see to that.
So yes, I reckon it could be one of the FTSE 100‘s best sectors to buy now. And I’d say Taylor Wimpey could be one of the best stocks in the sector for long-term investors. That’s even with the clear short-term risk.
