If I bought 10,000 Taylor Wimpey shares, how much dividend income would I get?

Harvey Jones started buying Taylor Wimpy shares last year thinking they looked good value with scope for dividend growth. Now he wants more.

| More on:

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.

I’m the happy owner of 3,425 Taylor Wimpey (LSE: TW) shares, having bought the stock on three occasions last autumn, and received two dividend payments so far.

So far, I’m up 27% from a combination of share price growth and reinvested dividends, and I’m pleased with that. These are early days, after all. I hope to hold the FTSE 100 housebuilder for years and years, generating plenty of income and growth along the way.

FTSE 100 high-yielder

The Taylor Wimpey share price is up 28.8% over the last year. Longer-term investors may not be so happy, as it’s down 10.18% over five. However, they should still be ahead, after dividends.

The housebuilding sector crashed around 40% after the Brexit vote in 2016, while the pandemic and cost-of-living crisis also wreaked havoc. House prices may have held relatively stable, but with inflation hitting double digits, they fell in real terms.

The slowdown hit revenues and profits at Taylor Wimpey, as both sale prices and completions dropped. That’s hardly surprising as construction’s a cyclical sector that benefited from near-zero borrowing costs for more than a decade.

I watched Taylor Wimpey’s share price from a safe distance. It retained a strong balance sheet, which allowed it to increase its dividend slowly but steadily. Then last September, I decided builders would recover as interest rate cuts loomed and mortgage rates dipped in anticipation.

Sadly, hopes of six rate cuts in 2024 have gone by the board. The election put paid to chances of a cut in June, so now we have to wait until August. We may only get a couple by year end.

Top recovery stock?

I can afford to be patient. Mortgage rates will fall at some point and, given the UK housing shortage, prices should start to pick up. However, I accept that the UK is in a bad place right now, and the recovery’s likely to be slow and stuttering.

With luck, the dividends will compensate. Taylor Wimpey shares yielded 6.5% in 2023 and are forecast to yield 6.3% in the year ahead. I do have one concern though. Next year’s payout is covered just 0.9 times by earnings, which makes it vulnerable.

However, the group has a policy of distributing a percentage of its assets rather than free cash, which will hopefully underpin payments. I’ll be watching closely.

The board increased the full-year 2023 dividend by a modest 1.91%, to 9.58p per shares. A similar hike would lift it to 9.76p in 2024. If I increased my current stake to 10,000 shares, that would give me income of £976 a year.

At today’s price of 149.3p, buying 10,000 Taylor Wimpey shares would cost an investor starting from scratch £14,930. 

Since I already own 3,425 shares, I’d only need to buy 6,575 shares, which would cost me £9,816. Sadly, I don’t have that amount of cash to hand today and if I did I’d probably use it to diversify into another sector.

Yet I think Taylor Wimpey shares will jump again when that first interest rate cut looms. I’d happily invest a smaller sum today, to continue my policy of building my position over time.

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.

Harvey Jones 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

What kind of return could I expect by investing £100 monthly in a Stocks and Shares ISA?

Using a Stocks and Shares ISA to avoid capital gains tax could grow a £100 monthly investment into a second…

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

Can strong operational momentum keep the Informa share price rising?

FTSE 100 company Informa has been performing well, but this may be just the beginning of a multi-year trend for…

Read more »

Market Movers

What’s going on with the Britvic share price?

Jon Smith flags up why Britvic's share price is surging on Friday, but believes that the company is in a…

Read more »

Cheerful young businesspeople with laptop working in office
Dividend Shares

2 super-cheap passive income shares I’m eyeing up right now

Jon Smith discusses two of his favourite passive income shares in the banking and property sectors, both featuring yields above…

Read more »

Chalkboard representation of risk versus reward on a pair of scales
Investing Articles

Up 37.5% in just 12 months, I think this is one of the FTSE 100’s best investments

Our author says this FTSE 100 company is likely to keep on capitalising on the AI and data boom. But…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

This UK share just spiked 15% on bid news. Can we bag a quick profit?

UK share prices are having a good 2024, so far, and this one's already up 39%. Two takeover bids in…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

I’m ‘blowing a raspberry’ at Raspberry Pi shares. Here’s why

Some early investors have made great profits from Raspberry Pi shares. But our writer's questioning whether the 'easy money' has…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Dividend Shares

Here are brokers’ new price targets for Legal & General and National Grid shares

City analysts are generally very positive on National Grid shares. But they're not quite as bullish on the Legal &…

Read more »