Taylor Wimpey (LSE: TW.) might just be my pick of the FTSE 250 right now, with a 9% forecast dividend.
The Bank of England has just lowered interest rates to 3.75%, the lowest we’ve seen since early 2023. Governor Andrew Bailey did say that “with every cut we make, how much further we go becomes a closer call“. But the direction can only be down in 2026 and beyond, surely. And everything that helps make mortgages even a little cheaper should be a boon to homebuyers and housebuilders.
The Taylor Wimpey share price hasn’t had a good time. It’s down 16% year to date in 2025, and it’s lost a painful 36% in the past five years.
But we’re in this investment thing for the long term, right? And how many businesses are likely to have a more secure long-term future than selling into the UK’s chronic housing shortage?
With Taylor Wimpey’s 12 November trading update, CEO Jennie Daly told us that uncertainty ahead of the Budget had meant “softer market conditions in the second half of the year to date“. But the company kept its full-year outlook in line with previous guidance — so that’s around 10,400 to 10,800 home completions, excluding joint ventures.
Dividend danger
A high dividend yield can mean investors have doubts about a company’s ability to pay it. And in Taylor Wimpey’s case, the company doesn’t provide guidance for the actual dividends it expects.
Instead, it has a policy of paying out 7.5% of net assets or at least £250m annually. That meant this year’s interim actually fell slightly, to 4.67p per share from 4.8p at the same stage a year ago.
We won’t know how much the second half will bring until the results are revealed. That means we’ll have to wait until March. And it adds extra uncertainty to the usual risk that any dividend can potentially be cut at any time.
Long-term outlook
Interest rates are falling, and that’s good. But I fear the UK housing market might still take some time to get back on its feet.
With our pockets under pressure, a lot of people still have higher spending priorities than looking for a new home. I expect many will wait for a clearer view of where longer-term interest rates might go.
It means the Taylor Wimpey dividend could rise or fall this year, with the uncertainty extending further. And I think that could create yet further share price weakness, maybe for two or three more years.
Buy, or not?
Investors wanting regular passive income to live on might turn to more assured FTSE 250 alternatives. But I reinvest my dividends, and short-term ups and downs don’t bother me much. Investors in the same position might do well to consider Taylor Wimpey shares now.
Buying now would add to the Persimmon shares I already hold, which is not great for diversification. But I’m considering it.
