Right now, the Taylor Wimpey (LSE: TW) share price is a mess. It has plunged 10% in the last month and 33% over 12 months.
If anything, that understates the pain. A decade ago, the shares traded at around 200p. Today, they sit at 101p. That’s roughly half.
My FTSE 100 flop
This housebuilder, like the rest of its sector, has been clobbered by everything from Covid and Brexit to inflation and high interest rates, while inflation has pushed up construction costs. April’s rise in employer’s National Insurance and the minimum wage made workers even more expensive.
We shouldn’t underestimate the impact of the end of the Help to Buy scheme in 2023. This supported both demand and prices by giving first-time buyers a leg up.
Even Labour’s pledge to build 1.5m homes hasn’t lifted the gloom. Completions have stalled lately. Taylor Wimpey expects to complete between 10,400 and 10,800 UK homes in 2025, excluding joint ventures.
On 30 July, the company reported a pre-tax loss of £92.1m for the first half of 2025, down from a £99.7m profit the year before. A £222m cladding fire safety provision was the main culprit. The board trimmed 2025 profit guidance from £444m to £424m.
I bought the FTSE 100 housebuilder a couple of years ago, tempted by a price-to-earnings ratio of around seven and a dividend yield topping 7%. After a brief initial spike, it’s been downhill ever since.
Brilliant rate of income
While I’m sitting on a capital loss of around 20%, I’ve just about broken even overall. That’s thanks to one big silver lining: one of the highest yields on the FTSE 100, currently 9.34%.
Of course, no dividend is guaranteed. Last week, the board trimmed the interim dividend slightly, from 4.8p to 4.67p. But over the last five years, it’s held up well.
A £10,000 investment five years ago would have bought 8,333 shares at the August 2020 price of 120p each. They’re down 16.6% since, reducing their value to £8,340. That’s a loss of £1,660.
However, over the same period, those shares would’ve paid out 41.16p in dividends per share, or £3,430 in income. That would lift the total return to £11,770, an increase of 17.7%. This assumes they took their dividends as income rather than re-investing them.
While that’s hardly a stellar return, it does show how a generous dividend can soften the blow of poor price performance. And remember, Taylor Wimpey shares are beaten down right now. Can they recover?
This stock could grow
Seventeen analysts currently offer 12-month forecasts for the stock. Their median target is 136.4p, a potential gain of almost 35%. If that pans out, the total return from both income and growth could near 45%. That’s optimistic, but it’s nice to picture it.
The Bank of England may cut interest rates tomorrow (7 August), which could give house prices a lift. But affordability is still stretched, sentiment remains weak, and inflation is eating into margins.
I’ve been overly optimistic about Taylor Wimpey — and look where that landed me. Even so, I’m thinking about adding to my stake. Today’s dividend yield looks irresistible, and the lower entry price is tempting. I think the shares are worth considering for long-term investors who understand the risks as well as the potential rewards.
