Slowly but surely, my outsized bet on Taylor Wimpey (LSE: TW) shares is starting to take shape. It isn’t paying off yet, but there are signs of progress. Or am I deluding myself?
It’s always a risk with a stock like this, one that comes with an eye-popping dividend. The income alone is stellar. A trailing yield of 8.8% would almost double my money in eight years. But I’d like the shares to climb too, and they’re down 11% over one year and 27% over five. I think that could change though.
The FTSE 250 housebuilder has a decent record of increasing shareholders payouts, with a compound annual growth rate of 17.8% over the last decade. That’s slightly misleading though. The dividend per share was more than doubled in 2021, from 4.14p to 8.58p, but growth has slowed since. In fact, the board cut the dividend in 2024, albeit by a modest 1.25%, to 9.46p per shares. A further cut to 9.06p seems likely in 2025, which is a larger drop of 4.2%.
FTSE 250 high-income stock
Dividend cover’s getting very thin at just 0.9. Ideally, payouts should be covered twice, not less than once. Despite that anticipated cut, the forward yield for 2026 sits at 8.4%, which is hard to grumble about.
Housebuilders have endured a tough decade, and Taylor Wimpey’s no exception. In January 2016, the shares traded around 190p. Today, they’re around 107p. Brexit, fears of a house-price crash, rising mortgage rates and inflation, plus higher labour and material costs, have all taken their toll. The cladding scandal following Grenfell cost it more than £500m.
Property completions did rise 6% to 11,229 in 2025, while average selling prices climbed 5% to £335,000. Yet total operating profit only edged up slightly, from £416m to £420m, while margins narrowed from 12.2% to 11%.
Falling mortgage rates may help
I’m pinning my hopes on more interest rate cuts. Some brokers expect inflation to fall to 2% by spring, persuading the Bank of England to cut base rates from 3.75% to 3% this year. That would shrink mortgage rates and boost demand, while slowing cost growth.
Brokers seem optimistic. Their forecasts produce a consensus one-year share price target of 125p. That’s up a solid 16.9% from today. Add the 8.4% forward yield and the total projected return climbs to 25.3%, which would turn a £10,000 stake into £12,530. I’d be delighted with that.
Challenges remain. The UK economy’s fragile, skilled labour’s scarce and unemployment’s rising. Prices in London and the Southeast, where Taylor Wimpey is focused, are slipping.
Despite that, I recently increased my stake, and I think the shares are worth considering with a long-term view, especially for income-focused investors. My shares are down 6% overall since I started buying the stock in 2023, but I’m up 12% with dividends reinvested. The next one lands on 26 March, and I’m already looking forward to it. If I get a spot of share price growth on top, I’ll be more than happy.
