Does an 8.5% dividend yield make Taylor Wimpey shares the FTSE 100’s best buy?

There might still be a few bumps in the road ahead, but here’s why Taylor Wimpey shares look like a top long-term income buy to me.

| 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.

Happy parents playing with little kids riding in box

Image source: Getty Images

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.

We might be in a property slump, but Taylor Wimpey (LSE: TW.) shares have been climbing since June.

We’re still looking at a fall in the past five years. But I think the omens could be coming together for a new bull run.

Property prices

Taylor Wimpey has been hit by two things. One is the property market slump resulting from soaring interest rates. The other is a rise in costs due to general inflation.

And it can be hard to pass on those costs to customers when fewer of them can afford to take on mortgages. But isn’t this all a short-term thing?

Well, so far in 2023, things do look tough. The first half brought a 21% fall in revenue. And profit before tax dropped by 29%.

But what I think concerns me most is that Taylor Wimpey’s operating margin took a hammering. It fell from 21% at the end of 2022, to just 14%. By the time that squeeze makes it down to the adjusted earnings per share line, we see a 44% drop.


Still, what counts most for me is dividends, and I’m talking about long-term income.

Unusually, Taylor Wimpey’s policy is to pay 7.5% of net assets each year as ordinary dividends. It’s not a proportion of earnings, which could have seen the 2023 payout slashed.

No, the board actually lifted the H1 dividend slightly, by 3.7%. That’s based on its view that full-year completions should be near the top end of forecasts.

And, with the share price so low, the forecast dividend yield for the full year is now up at a whopping 8.5%.


According to both Halifax and Nationwide, the 2023 property price fall is the biggest since 2009. Still, we don’t see falls very often. And if prices rise for 13 out of every 15 years, I rate that a long-term win.

Still, we’re not out of the short-term pain yet, and I can see pressure on the dividend. Some experts think inflation and interest rates won’t fully cool until well into 2024, and house prices won’t get back on track until the end of that year.

They might be right. And for Taylor Wimpey to maintain the same dividend level in 2024 could be a tough task.

Net cash held up well enough in the first half of 2023. But the board reckons that by the end of this year, the figure could be around a third lower than December 2022.

Long term

So, more short-term pain for shareholders? Yes, I think there could be.

But, even if it halves in 2024, the Taylor Wimpey dividend yield would still come in around the FTSE 100 average. If the share price doesn’t move, that is.

And looking to the long term, by which I mean a decade or more, I think I see one of the best dividend prospects in the whole of the Footsie here.

Will I buy? Well, I already hold housebuilder shares. But for my next buy, I might just double up with some Taylor Wimpey.

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

Investing Articles

Down 23%! Should I buy more CrowdStrike shares for my Stocks and Shares ISA?

Sometimes bad news can be good news for long-term investors. But is that the case for CrowdStrike in relation to…

Read more »

Investing Articles

2 UK shares near 52-week lows I’m considering snapping up

These UK shares are loitering near, or at, 52-week lows. Are these prime opportunities for our writer to boost her…

Read more »

Investing Articles

Unilever: a passive income stock with potential for decades of dividend growth

Stephen Wright thinks Unilever can keep reducing its share count for years to come. And this should help make it…

Read more »

Middle-aged black male working at home desk
Investing Articles

Worried about retirement? I’d buy high-yield dividend shares to build wealth

The number of pensioners enduring poverty in the UK looks set to rise. Investing in dividend shares could help Britons…

Read more »

Investing For Beginners

2 boring but beautiful FTSE 100 stocks to add to my ISA

Jon Smith runs over a couple of FTSE 100 stocks that he really likes the look of, even though they…

Read more »

Investing Articles

Here’s how I could supercharge my wealth by snapping up the best dividend stocks!

This Fool explains how dividend stocks play a crucial part of her aspirations to build wealth, and details one pick…

Read more »

Young female analyst working at her desk in the office
Investing Articles

Revenue up 10% and accelerated growth potential for this overlooked FTSE 250 company

Today's first-quarter update from this good-value FTSE 250 company keeps me keen on the stock as recovery and growth continues.

Read more »

Investing Articles

Here’s why I’m so bullish about the BT share price now

The BT share price shot up after FY results, and a couple of months on it's still up there. Might…

Read more »