FTSE 100 builder Taylor Wimpey’s (LSE: TW) 2025 numbers, released on 20 March, saw completions, revenue and operating profit rise, and net cash looking solid.
The combination of operational resilience and a depressed share price keeps a tantalising dividend play firmly on the table, in my view. So how much can I make from the stock?
Dividend income gains?
Taylor Wimpey’s total 2025 dividend was 7.62p, giving an 8.7% yield on the current 88p share price. Analysts forecast this will fall slightly to 8.5% this year, before increasing to 8.8% next year and the year after. This is nearly triple the present FTSE 100 average dividend yield of 3.1%.
Using the 8.8% projection as a base — although this can go down as well as up — my £20,000 holding in the firm could make me £28,063 after 10 years. This assumes the dividends are reinvested into the stock to harness the tremendous power of ‘dividend compounding’.
After 30 years — the end of the standard long-term investment cycle — the dividends would have risen to £257,577. Including my initial £20,000 investment, the total value of the holding would be £277,577 by then.
And that would pay me an annual income of £24,427 by that point!
Share price gains?
Discounted cash flow (DCF) analysis identifies the price at which a stock should trade by projecting future cash flows and ‘discounting’ them back to today.
Analysts’ DCF modelling varies — some more bullish than mine, others more bearish — depending on the variables used. However, based on my assumptions — including an 8.7% discount rate — Taylor Wimpey shares are 45% undervalued at their current 88p price.
That suggests a ‘fair value’ of around £1.60 — nearly double where the stock trades today.
Share prices tend to converge to their fair value over time. So this suggests a potentially superb buying opportunity to consider today if those DCF assumptions hold.
Supported by growth momentum?
Ultimately, any company’s dividends and share price are driven by growth in earnings.
A risk for Taylor Wimpey is a slower-than-expected recovery in UK housing demand. This could keep sales rates subdued and delay improvement in profit margins. Another is persistent build-cost inflation, which could limit profitability even if selling prices stabilise.
Even so, analysts forecast that the company’s earnings will grow a whopping average of 26.3% over the medium term.
In this vein, Taylor Wimpey’s 2025 results showed completions rose to 11,229, helping lift revenue 12% year on year to £3.84bn. Operating profit edged up slightly to £420.6m, thanks to firmer private selling prices and disciplined cost control.
The group’s large, short‑term landbank, improving build quality and expanding outlet network give it solid visibility over future volumes. The landbank model involves securing several years of future building plots in advance. This gives the business multi-year cash flow visibility and smooths earnings across the longer business cycle.
And the year‑end net cash position of £343m underlines the resilience of its model even in a muted demand environment.
My investment view
The size of my Taylor Wimpey is consistent with the overall risk/reward profile of my portfolio, so I will keep it as is.
For other investors looking for high dividend yield supported by strong earnings growth potential, I think the stock is worthy of attention.
