Taylor Wimpey (LSE: TW.) shares are trading close to their lowest price for over a decade. The near 13-year low share price is a fall of 55% from a recent high. The shares have even been flirting with a price more akin to penny stocks, dipping to 97p in the month of November.
Yet the fortunes for the housebuilder could be quietly turning around. I think there’s a fair chance of Taylor Wimpey shares turning the corner. Here are the three reasons why.
Good news
The first bit of good cheer comes by way of the Autumn Budget. Although it would be more accurate to say that Taylor Wimpey and the housing sector was unaffected. What is it they say? No news is good news? I’d say that’s an appropriate phrase here.
The main worry was the introduction of punishing property taxes, which have largely been avoided. Now that the (hopefully) last tax-raising budget of this government is done and dusted, the housing sector might have a clear run at the next few years.
Another factor in Taylor Wimpey’s favour is interest rates. Costlier borrowing means fewer mortgages. So it’s no accident the housing slump has coincided with rates climbing from near 0% to over 5%. The markets are expecting a rate cut in December and more could be on the way next year too.
The third reason, and the real wild card of the bunch, is the new Planning and Infrastructure Bill, which is in the final stages of being approved. The idea is to “get Britain building again”.
It’s true that the wide range of changes will take years rather than months to take effect. Also, no one can yet say how effective the new measures will be. But less red tape is often welcome for a sector drowning in the stuff.
A buy?
Do these three reasons make Taylor Wimpey shares a slam dunk? Not quite. Any optimism must be tempered with the realities of housebuilding in the UK. Wage costs are climbing as are the costs of raw materials. Add in the high cost of land and copious regulation and you’ve got a sector that is struggling.
But of the several housebuilders to choose from, Taylor Wimpey might be the best choice for dividend investors. The firm offers a dividend yield of 9.22%. Current forecasts suggest that will lower slightly in the next financial year, but only to 8.97%. That’s still one of the highest around.
The dividend policy of distributing a percentage of net assets is a unique proposition that could prove very lucrative for anyone wishing to take the plunge. I’d call it one to consider. Though in truth, I believe there are many more attractive FTSE stocks around at the moment.
