I’m hunting for top dividend shares. Should I buy high-yield Taylor Wimpey?

Taylor Wimpey offers dividend yields way above the 3.8% FTSE 100 average. So is it one of the index’s best dividend shares?

| 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.

Middle-aged black male working at home desk

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.

Housebuilders like Taylor Wimpey (LSE:TW) have an excellent reputation as reliable and generous dividend shares. It’s why I bought this particular FTSE 100 share for my own portfolio in 2017.

But while the builder continued to offer above-average dividend yields, I haven’t been tempted to add more of its shares to my Stocks and Shares ISA. For the record, its dividend yield for 2023 and 2024 sits at an impressive 8.2%.

However, could recent good news suggest that trading conditions might be about to improve? And should I buy more Taylor Wimpey shares following these developments?

Good news, part 1

Property prices have steadily eroded as interest rates have steadily increased and the UK economy has spluttered. But fresh data from the Halifax has fed speculation that the market may finally be stabilising.

While average home prices were down 3.2% year on year in October, those prices were up 1.1% from September. This broke a streak of six straight monthly reversals.

Good news, part 2

In other encouraging news this week, Savills predicted that the current downturn will “bottom out” around the middle of 2024. This will happen as mortgage rates ease in expectation of interest rate cuts later in the year, the estate agency said.

It added that “although affordability is only likely to improve gradually, it should buoy buyer confidence and allow the first shoots of recovery to appear“.


While these reports contained some good news, there were also some details that suggest the housebuilders will continue to struggle.

Halifax also said that “buyer demand… remains weak overall“, with prices rising in October due to supply constraints as prospective sellers keep their properties off the market.

The building society also said it doesn’t expect home prices to continue growing until 2025. Meanwhile, Savills thinks average prices will fall a hefty 3% next year.

House price projections through to 2028.
Source: Savills

I’m concerned that the housing market could perform even worse over the next couple of years too, given the ongoing danger of sticky inflation that means interest rates may remain higher for longer. A pronounced downturn in the UK economy would also weigh heavily on home sales.

Should I buy Taylor Wimpey shares?

Taylor Wimpey’s dividend forecasts already look fragile. And any worsening of the market as suggested above would make them appear even more flimsy.

At the moment, annual dividends of 9.4p per share are predicted through to next year, in line with last year’s reward. But these projections are outstripped by anticipated earnings of 9.2p and 9.1p for 2023 and 2024 respectively.

On the plus side, Taylor Wimpey has a strong balance sheet that could help it meet these forecasts. Net cash actually edged slightly higher to £654.9m as of June.

But a blend of consistently-weak demand and rising build costs could put its balance sheet under growing strain and test its ability (and its appetite) to keep paying big dividends.

The long-term outlook for UK housebuilders remains robust. As that table by Savills shows, home values appear on course to rise strongly once current market trouble subsides. But right now, I’d rather buy other UK shares to make passive income over the next couple of years.

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.

Royston Wild has positions in Taylor Wimpey Plc. 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 »