The dividends on Taylor Wimpey (LSE:TW.) shares have experienced no little volatility in recent years. Having been cut and then rebuilt following the pandemic, cash rewards fell again in 2024 due to more specific pressures on the housing market.
The FTSE 100 housebuilder reduced dividends to 9.46p per share from 9.58p in 2023. This decision was “consistent with our ordinary dividend policy to return 7.5% of net assets per annum“, Taylor Wimpey said back then.
While falling interest rates could help support the builders going forwards, future profits and dividends could still disappoint if the UK economy weakens. So what level of cash rewards are City analysts expecting from Taylor Wimpey shares over the medium term?
FTSE 100-beating yields
| Year | Dividend per share | Dividend growth | Dividend yield |
|---|---|---|---|
| 2025 | 9.58p | 1.2% | 8.2% |
| 2026 | 9.64p | 0.6% | 8.2% |
| 2027 | 9.73p | 0.9% | 8.3% |
As you can see, dividend growth at the Footsie business is tipped to resume slowly rather than with a bang through to 2027. This shouldn’t perhaps be a surprise given Taylor Wimpey’s prudential approach and the still-uncertain outlook for newbuild demand.
However, this is by no means a reason to be disappointed. You’ll also notice that dividend yields for the next three years sit proudly above 8%. To put this in perspective, the long-term average yield for FTSE 100 shares is between 3% and 4%, and currently sits at 3.7%.
However, dividends are never, ever guaranteed. City forecasts can also fall short of their mark when adverse events (like weakening sales or balance sheet trouble) rear their head.
In the case of Taylor Wimpey, I’m by no means certain that the business will meet payout estimates in the near term and beyond. On the positive side, its balance sheet remains in rude health, with net cash coming in at £565m at the end of 2024, ahead of guidance.
Furthermore, with the dividend policy correlated to net assets instead of earnings, payouts tend to be more resilient during downturns. Yet this doesn’t mean that cash rewards aren’t vulnerable, as last year’s reduction showed.
With Britain’s economy struggling to grow, and Stamp Duty changes threatening first-time buyer demand, it’s quite possible dividends could fall short of forecast. Builders are also having to deal with rising costs and shortages of key labour.
Should investors consider the stock?
But on balance, I think Taylor Wimpey shares are a buy to consider today. I say this as someone who holds the FTSE 100 builder.
Despite the weak economy, conditions in the housing market remain robust. Indeed, latest Rightmove data showed average UK house prices rose 1.4% in April despite Stamp Duty changes, giving me confidence in current dividend forecasts.
And things look encouraging over the long term too, thanks to Britain’s rapidly growing population and planned changes to planning rules on home construction. I’m confident that Taylor Wimpey could deliver solid capital gains and excellent passive income over the next decade.
