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Taylor Wimpey (LSE: TW.) would possibly simply be my decide of the FTSE 250 proper now, with a 9% forecast dividend.
The Financial institution of England has simply lowered rates of interest to three.75%, the bottom we’ve seen since early 2023. Governor Andrew Bailey did say that “with each reduce we make, how a lot additional we go turns into a better name“. However the route can solely be down in 2026 and past, certainly. And all the pieces that helps make mortgages even a little bit cheaper must be a boon to homebuyers and housebuilders.
The Taylor Wimpey share value hasn’t had fun. It’s down 16% yr so far in 2025, and it’s misplaced a painful 36% prior to now 5 years.
However we’re on this funding factor for the long run, proper? And what number of companies are prone to have a safer long-term future than promoting into the UK’s continual housing scarcity?
With Taylor Wimpey’s 12 November buying and selling replace, CEO Jennie Daly instructed us that uncertainty forward of the Funds had meant “softer market circumstances within the second half of the yr so far“. However the firm stored its full-year outlook in step with earlier steerage — in order that’s round 10,400 to 10,800 residence completions, excluding joint ventures.
Dividend hazard
A excessive dividend yield can imply traders have doubts about an organization’s skill to pay it. And in Taylor Wimpey’s case, the corporate doesn’t present steerage for the precise dividends it expects.
As a substitute, it has a coverage of paying out 7.5% of internet belongings or no less than £250m yearly. That meant this yr’s interim truly fell barely, to 4.67p per share from 4.8p on the similar stage a yr in the past.
We received’t know the way a lot the second half will convey till the outcomes are revealed. Which means we’ll have to attend till March. And it provides additional uncertainty to the standard threat that any dividend can probably be reduce at any time.
Lengthy-term outlook
Rates of interest are falling, and that’s good. However I concern the UK housing market would possibly nonetheless take a while to get again on its ft.
With our pockets below strain, lots of people nonetheless have increased spending priorities than on the lookout for a brand new residence. I anticipate many will look ahead to a clearer view of the place longer-term rates of interest would possibly go.
It means the Taylor Wimpey dividend may rise or fall this yr, with the uncertainty extending additional. And I believe that might create but additional share value weak point, perhaps for 2 or three extra years.
Purchase, or not?
Buyers wanting common passive revenue to stay on would possibly flip to extra assured FTSE 250 alternate options. However I reinvest my dividends, and short-term ups and downs don’t hassle me a lot. Buyers in the identical place would possibly do effectively to think about Taylor Wimpey shares now.
Shopping for now would add to the Persimmon shares I already maintain, which isn’t nice for diversification. However I’m contemplating it.
