Investors in Taylor Wimpey (LSE: TW) shares have been losing fortunes lately rather than making them. Sadly, I’m one of them. Is 2026 the year the FTSE 250 housebuilder finally comes good?
The Taylor Wimpey share price is down 20% in the last year, and more than 30% over five. Whenever it falls, I’ve taken the opportunity to average down and pick up more of its shares. That means I get them at an ever lower price, and bag an even higher rate of income.
Today, the shares offer an absolutely stunning 9.27% dividend yield. Investors can’t resist, making this one of the top 10 most-bought UK shares, according to AJ Bell. British investors rightly love their dividends and so do I. But a little share price growth wouldn’t go amiss either.
FTSE 250 income star
The big volume housebuilders are all struggling right now. Inflation pushed up the cost of materials, inflation-busting Minimum Wage increases and employer National Insurance hikes drove up labour costs, while, yes, inflation has squeezed incomes and pushed up mortgage rates, stretching affordability even further.
Taylor Wimpey’s nonetheless forecasting an operating profit of £424m across 2025, up slightly on last year’s £416m. Solid, but not spectacular.
I’m hoping it can move on from the cladding and fire safety scandal, which has cost it an epic £425m in provisions, more than wiping out last year’s profit. Once that’s resolved, future results could look somewhat better.
Dividends and recovery potential
A more buzzy housing market would also help. Things went quiet in the run-up to last month’s Budget, but with luck activity may now pick up. Housebuilders could get a lift on Thursday (18 December) when the Bank of England’s expected to cut base rates by 25 basis points to 3.75%. Two or three more cuts are expected next year, potentially reducing base rate to 3%. However, a return to the days of near-zero rates looks unlikely.
Right now, I’m a little nervous about that dividend. When yields are this high, payouts can come under pressure. Taylor Wimpey’s board cut the full-year 2024 dividend by 1.25% to 9.46p per share. That was covered just 0.84 times by earnings, meaning the company paid out more than it earned. Unless cover improves, we could see bigger dividend cuts in future. That would also hit the share price, which worries me as someone who’s gone big on this stock.
Modest valuation
Personally, I’ve got enough exposure to Taylor Wimpey’s fortunes, and won’t be buying more. Yet I still think income-focused investors could consider buying today, provided they take a close look at what they’re getting. The shares still look decent value, with a price-to-earnings ratio of 12.
I continue to think there’s an outside chance Taylor Wimpey could make me a fortune next year. Consensus forecasts produce a one-year price target of 128.4p, more than 26% higher than today’s 102p. I’d be thrilled with that, as that yield would lift my total return to 35%. Fingers crossed!
Dividend-hungry investors who fancy Taylor Wimpey’s risk profile will find several FTSE 100 stocks offering similarly high yields, plus some share price growth too. It may be worth checking them out.
