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

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

Happy couple showing relief at news
Investing Articles

I’d buy 38 shares of this FTSE 100 stock each week to target £1,000 in passive income

The UK stock market is full of lucrative dividend-paying stocks that investors can use to build a passive income. Here’s…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

Could the Lloyds share price double in 2024?

The Lloyds share price has had a weak 2023, rising by just 2% as we almost reach year end. What…

Read more »

Black father and two young daughters dancing at home
Investing Articles

£2,500 in savings? Here’s how I’d aim to turn that into an £27,113 second income

Many of us have savings, or put an amount aside every month. But it's what we do with it that…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Are Anglo American shares like buying £1 coins for 50p?

Jon Smith takes a look at the falling price of Anglo American shares and asks whether they're chronically undervalued or…

Read more »

Close-up of British bank notes
Investing Articles

I’d buy 1,064 shares of this dividend growth stock for £1,000 a year in passive income

Shares in FTSE 100 conglomerate Bunzl come with a 2% yield at today’s prices. But Stephen Wright thinks this is…

Read more »

Growth Shares

Under 50? Here are 3 monster growth stocks to consider for 2024 and beyond

These US-listed growth stocks could deliver blockbuster gains for long-term investors in the years ahead, says Edward Sheldon.

Read more »

Investing Articles

Here’s how much I’d need to invest in Tesco shares for £100 in monthly passive income

Our writer does not own shares of this supermarket for passive income, but how many would he need to buy…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could £200 of Christmas money be used to start buying shares this month?

Our writer reckons if he was a stock market novice, he could put some Christmas money to work and start…

Read more »