The Motley Fool

I’d invest £1k in this FTSE 100 9%+ yielder inside a Stocks and Shares ISA

Image source: Getty Images.

Choosing good companies for your Stocks and Shares ISA portfolio is one thing, but it also pays to check whether the sector they operate in is also healthy.

Taylor made for you

After the 2016 EU referendum shock, investors dumped housebuilding stocks en masse, believing the sector would be hammered by the economic uncertainty to come. Pretty much every stock fell as one, regardless of their individual prospects.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

They have been rising as one ever since, as demand for property has held firm, underpinned by the housing shortage and Help to Buy scheme.

Housebuilder Taylor Wimpey (LSE: TW) has been a beneficiary, rising almost a third in the last 12 months alone. Measured over five years, the Taylor Wimpey share price is up more than 60%, despite the post-Brexit crash in the middle of that period.

The FTSE 100 stock is up aother 4% today, following publication of a promising trading statement for the year ended 31 December 2019, ahead of next month’s full-year results.

CEO Pete Redfern said results are in line with expectations, despite political and economic uncertainties, as the group continues to experience a good level of demand for our homes”, with second-half trading as anticipated.

Capital challenge

The housing market remains stable, although conditions are a bit more challenging in London and the South East, and at the more expensive end of the market.

Taylor Wimpey completed 5% more houses, 15,719 in total, with the reservation rate rising strongly and cancellation rates low. House price growth is flattening, though, up just 1% on private completions to an average of £305,000.

I like to see a strong order book, as this suggests healthy demand and earnings going forward, and here Taylor Wimpey doesn’t disappoint. At the end of last year, it recorded record total orders of £2.18bn, up 22% over 12 months. One headwind is that building costs rose 4.5%, although cost pressures appear to have eased lately.

The right balance

An economic slowdown or house price crash is always a threat when holding housebuilding stocks but Taylor Wimpey has a strong balance sheet, with net cash of £546m at the end of last year giving protection against any downturn. That is despite paying £600m in dividends to shareholders last year, up from £500m the year before.

I like investing in cash-generative businesses like this one, especially when they are so keen for shareholders to benefit. As Taylor Wimpey previously announced, it intends to return £610m to shareholders this year, as a total dividend.

The housing market has been anticipating a ‘Boris bounce’ ever since the election, and today Taylor Wimpey welcome the increased political stability.

Despite this positive outlook, the £6.8bn company trades at a modest valuation of just 9.7 times earnings, giving scope for further share price recovery, and a cushion against any setbacks. The forecast yield is a whopping 9.3%, making this one of the most generous income stocks on the FTSE 100. Buy now and you could enjoy a share of next year’s bumper £610m dividend spree, with the hope of more to come.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.