Taylor Wimpey (LSE: TW.) shares have experienced some weakness in 2026, falling about 26%. As a result, they currently offer a trailing dividend yield of around 9.6%.
Could they be a good option to consider for an ISA or Self-Invested Personal Pension (SIPP)? Let’s discuss.
Three things to like
At first glance, Taylor Wimpey shares look attractive. For a start, we have the massive yield mentioned above. For 2025, the company paid out 7.62p per share in dividends. So with the share price sitting below 80p, we’re looking at huge dividends.
Second, Britain continues to have a housing crisis. So the long-term story here appears to be favourable. It’s worth noting that according to the National Housing Federation, there are 8.5m people in England who can’t access the housing they need. Taylor Wimpey and the other UK housebuilders could help to fix this.
One other attraction of the stock is that it has fallen a long way. Over the last 18 months or so, it has dipped about 50%. After that kind of fall, there could be scope for a rebound. It’s worth noting that the average analyst price target is 108p (about 35% above the current share price).
What could go wrong?
When we dig deeper however, there are few issues that aren’t ideal. One is costs. Right now, all UK housebuilders are all saying the same thing – their costs are surging (due to energy and commodity prices). This is bad news for profits and dividends.
Zooming in on Taylor Wimpey, it said in late April that it now expects build cost inflation to be in the low to mid-single digits in 2026, up from its previous forecast of low single-digit inflation. As a result, analysts are now questioning its operating profit guidance of £400m for the year.
Worryingly, earnings forecasts are plummeting. Over the last month, the consensus earnings per share forecast for 2026 has fallen by around 10% (meaning the price-to-earnings (P/E) ratio of 12 may not be so reliable).
Another issue is affordability. All of a sudden, it looks like UK interest rates won’t come down much in 2026 (they may actually rise). This is a problem for Taylor Wimpey. Ideally, it needs rates to come down materially so that buyers pile into the housing market.
Finally, there’s the dividend. Not only is it predicted to fall to 6.96p per share this year, but dividend coverage (the ratio of earnings per share to dividends per share) is very low meaning that the payout doesn’t look sustainable.
One other thing to note with the dividend is that the company has an unusual policy. Going forward, it has said that it will return a minimum of 5% of net assets as an annual ordinary dividend, with a further 2.5% of net assets returned either as an ordinary cash dividend or via a share buyback.
Worth a look?
Putting this all together, the shares have their pros and cons. There are things to like, but there are also a lot of risks (share price weakness and dividend cuts).
Personally, I see them as too risky. But they could be worth considering if an investor has a long-term mindset and a high risk tolerance.
