Throughout the last 14 years, Taylor Wimpey (LSE:TW.) shares have continuously paid out dividends to shareholders. While it’s not been a straight lineup, dividends are now massively ahead of where they were back in 2011, standing at 9.58p per share at the end of 2023 versus 0.38p in 2011. And based on the latest analyst forecasts, there may be more room for growth
| Year | Dividend Per Share | Dividend Growth | Dividend Yield |
| 2024 | 9.6p | 0% | 6.0% |
| 2025 | 9.7p | 1% | 6.0% |
| 2026 | 9.8p | 1% | 6.1% |
| 2027 | 9.9p | 1% | 6.2% |
| 2028 | 10p | 1% | 6.2% |
Investors should never take forecasts, especially long-term ones, as gospel. After all, they’re notoriously inaccurate due to being highly sensitive to the constantly changing financial and economic landscape. Nevertheless, they remain a useful tool for getting a rough idea of what to expect.
So how realistic is a 10p dividend in 2028? And should investors be considering this business as a possible passive income investment?
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Why the shares are rising
The shares of Taylor Wimpey have been on a fairly good run of late. Since the start of 2024, the property developer has seen its market capitalisation grow by just over 10%. Yet, looking into the group’s latest financials, it seems this upward trajectory’s almost entirely driven by investor expectations.
Its half-year results for 2024 saw sales slide 7.3% to £1.52bn. On closer inspection, this seems to have been driven by a combination of weaker house prices as well as fewer home completions by the business. Looking at earnings, the situation’s even more dire. Pre-tax profits over the six-month period collapsed by almost 60%, due primarily to increasing the group’s cladding fire safety provision to £88m and higher material costs.
Needless to say, this doesn’t exactly sound like a catalyst for an uptick in the share price. Yet management’s outlook is what investors seem to be paying attention to.
Now that interest rates have started to drop, mortgages are starting to follow. Taylor Wimpey’s noted that it’s started seeing early signs of improvement in demand. So much so that management expected operating margins to expand in the second half of 2024.
Furthermore, despite falling behind in home completions during the first half, the group still expects to land at the higher end of its full-year guidance of 9,500-10,000 properties. When paired with higher margins, that means more sales and more profits are potentially on the way – a trend expected to continue as interest rates fall further.
Looking at the long term
It’s no secret that the UK’s short on housing. In fact, a big part of the new government’s manifesto was focused on this issue. And new policies have already started being implemented to make it easier for homebuilders like Taylor Wimpey to ramp up their construction efforts.
While that’s definitely a favourable tailwind to have, this isn’t the first time politicians have tried to spark faster housing developments. It’s too soon to tell whether Labour’s plan is working. But even if it does, there are still plenty of other home developers chasing the same opportunity.
All things considered, I think a 10p dividend by 2028 isn’t unrealistic. But given the lacklustre growth that represents, this stock doesn’t strike me as a terrific passive income opportunity. Therefore, I’m not planning on adding Taylor Wimpey shares to my portfolio today.
