Is it game over for the Taylor Wimpey share price?

The Taylor Wimpey share price has taken a beating for years and Harvey Jones doesn’t expect an instant recovery. Can the FTSE 100 stock prove a winner again?

| 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.

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.

If the Taylor Wimpey (LSE: TW) share price was a house, I wouldn’t buy it. It’s got a severe case of subsidence right now, having fallen 45% over the past five years, with a 20% slide in the last year alone.

Created with Highcharts 11.4.3Taylor Wimpey Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Plenty of investors have parted with their money though, me included. They thought the FTSE 100 housebuilder was a bargain, but every time the stock appeared to stabilise, it was hit by another earth tremor. So is it time to move on?

Writing for The Motley Fool, I’ve learned not to abandon a share just because it’s out of favour with the wider market. In fact, that’s often a trigger for me to buy. Troubled companies often bounce back stronger, but it can take time. That’s certainly the case here.

Should you invest £1,000 in The Prs Reit Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if The Prs Reit Plc made the list?

See the 6 stocks

Can this FTSE 100 straggler fight back?

Taylor Wimpey’s share price struggles reflects a challenging environment for UK housebuilders. 

Rising mortgage rates have hit affordability, while broader economic uncertainty cools demand. The cost-of-living crisis has driven up the cost of materials, and post-pandemic supply chain challenges linger. 

On 16 January, Taylor Wimpey confirmed the impact. UK completions fell to 9,972 last year, down from 10,356 in 2023. The overall average selling price slipped to £319,000, from £324,000.

On paper, Taylor Wimpey shares look like a bargain. With a price-to-earnings (P/E) ratio below 12, the stock is cheaper than the average FTSE 100 P/E of around 15 times. Its trailing dividend yield of 8.1% is eye-catching, offering a significantly higher income than cash, bonds and most FTSE 100 stocks.

Dividend payouts hinge on profitability, and Taylor Wimpey risks margin compression as sales shrink and costs rise. Upcoming national insurance hikes for employers won’t help, nor will the increased minimum wage. 

The group does boast a robust balance sheet and ended 2024 with a £2bn order book, but maintaining such a generous yield might become challenging if market conditions deteriorate further. The forecast yield of 8.6% is covered just once by earnings, worryingly. Taylor Wimpey has a good track record of dividend increases, but nothing is guaranteed.

Can the dividend compensate for lost growth?

So can the share price recover? The 16 analysts offering one-year share price forecasts have produced a median target of just over 148p. If correct, that’s an increase of around 25% from today. Combined with that yield, it would give investors a total return of 33% if true. Seems optimistic to me, but we’ll see.

The UK does face a chronic under supply of housing. This should support demand while that fat order book brings visibility.

What Taylor Wimpey shares really need is a string of interest rate cuts. That would shrink mortgage rates, revive the economy and ease cost pressures too. It would also make that dividend look even better, relative to yields on cash and bonds.

In my view, this isn’t game over for Taylor Wimpey. But investors tempted by that yield must realise this is a volatile sector on the front line of every economic issue. The share price is actually lower than it was 10 years ago. Even the brilliant dividend cannot totally compensate for that. Despite my concerns, I’ll play on. I still think it’s a winner over time.

Should you buy The Prs Reit Plc now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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 For Beginners

Why I’m staying away from the Barclays share price even with a 19% drop

Jon Smith explains why he's cautious right now about the Barclays share price, with the potential for lower revenues from…

Read more »

Investing Articles

2 FTSE 100 and FTSE 250 stocks to consider as stock markets plummet!

Looking for lifeboats as growth-crushing trade tariffs loom? Here are two (including a FTSE 100 gold stock) I think merit…

Read more »

Number three written on white chat bubble on blue background
Investing Articles

Just released: the 3 best growth-focused stocks to consider buying in April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

£10,000 invested in Watches of Switzerland shares 1 year ago is now worth…

Watches of Switzerland shares have been decimated by Trump’s tariffs on Switzerland. Dr James Fox explores whether this is an…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

Growth stocks are crashing! Here’s what I’m doing now

Our writer shares his thoughts as growth stocks get crushed, as well as a favourite from the Nasdaq that he…

Read more »

Investing Articles

What’s going on with the Nvidia share price now?

The Nvidia share price is tanking. Once the most valuable listed company, Nvidia has seen more than $1trn wiped off…

Read more »

Investing Articles

This FTSE AIM stock has £2.3bn in net cash, and a market cap of £2.4bn!

I love this FTSE AIM stock, but it really hasn’t delivered for me yet. The stock trades with crazily low…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

Down 15% in a week! Are these 5 FTSE 100 fallers screaming buys as markets plunge?

Five of Harvey Jones's favourite FTSE 100 stocks all have the same thing in common – they've fallen around 15%…

Read more »