I first bought Taylor Wimpey (LSE: TW) shares in September 2023, when they were still listed on the FTSE 100. After falls of 30% over two years and 15% in 2025, the housebuilder now resides in the FTSE 250. Am I unhappy? Not a bit.
I’ve repeatedly taken advantage of the slide to average down on my original purchase, picking up more stock at the lower price. Better still, I’ve already received five dividends so far, the most recent landing in my Self-Invested Personal Pension (SIPP) on 14 November, all automatically reinvested.
A magnificent dividend stock
Never underestimate the value of dividend stocks, especially an ultra-high-yielder like this one. Taylor Wimpey has an astonishing trailing yield of 9.1%. While I’m down 10% in share price terms, I’m up 13% overall.
I think the Taylor Wimpey share price is heading for better days in 2026 and beyond. These things aren’t guaranteed, but here’s my thinking. It’s been a tough decade all round for housebuilding stocks. Brexit, Covid, and the cost-of-living crisis all hammered sentiment and returns. Perhaps the biggest blow was scrapping the Help to Buy scheme, which gave government support to first-time buyers of new homes.
Taylor Wimpey has also been hit by huge remediation costs for cladding and cavity barriers following the Grenfell tragedy. That’s cost £435m so far, but it may secure some compensation from contractors.
We’re not out of the woods yet. Forecasts suggest the UK economy will barely grow next year, so no help there. But the Bank of England is cutting interest rates, which should drive mortgages lower. There’s already talk of sub-3% rates. That should ease affordability issues and drive up demand for new homes.
Taylor Wimpey shares look good to go, with a modest price-to-earnings ratio of 12.3. Brokers are optimistic too. Sixteen analysts offering one-year price forecasts produce a medium target of 128.4p. That’s almost 25% higher than today’s price.
Plus there are more dividends along the way. While the board did cut the dividend per share in 2024, it was only by 1.25%. Something similar is expected in 2026. The forecast yield of 8.85% would lift the total return beyond 30%. Remember, these are only forecasts.
FTSE 250 recovery potential
But before I get carried away, there are obvious risks. Full-year 2025 pre-tax profits are expected to rise only marginally, from £418m to £424m. And that’s way below the £828m posted in 2022. Higher employment costs will squeeze margins, including the hike to employer’s National Insurance rise and another inflation-busting minimum wage increase.
Taylor Wimpey isn’t suddenly going to ramp up housebuilding either. These things take time. Plus, the entire sector is vulnerable to wider economic shocks, as we’ve seen.
Housebuilding tends to be cyclical. We may be near the bottom now, but the upwards swing may prove sluggish. That said, I enter 2026 full of hope for this one. I think there’s a fair chance brokers could be right and the shares could enjoy an outsized rally. If they don’t, at least I’ve got those dividends, assuming they hold. And I’ll reinvest every penny.
