Dividend of the Day: Why Taylor Wimpey plc’s 6% Yield Is On My Income Radar

A 34% increase in pre-tax profits at Taylor Wimpey (LON:TW) is fuelling its healthy dividend payments.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The importance of dividends to investors can’t be understated. This example from the US market says it all:

Over the last 100 years the S&P 500 rose 273-fold, but adjusted for dividends it rose 18,520-fold.

Dividends are a massive component of long-term investing results. If you’re interested in income-producing, dividend-paying shares, you may be interested in the payout on offer from one of the UK’s leading homebuilders.

The house builders have fallen heavily recently on fears of what a “Brexit” could do to the London housing market.  There have also been concerns over the scarcer availability of labour for housebuilders that may result from a Brexit.

However, according to bookmakers Betfair, the odds of a Brexit are three to one. “Staying in” remains the strong favourite by the odds, and while an upset could occur, the bookmakers rarely get it wrong.

This could be good news for the house builders, and might represent an opportunity — especially as UK housing fundamentals remain strongly in favour of further building. Demand is still outstripping supply by a distance, in the south-east especially.

If you’re looking for income, most of the house builders have already paid their bumper special dividend payouts for the year. According to data from DividendMax, there is one exception — and that is Taylor Wimpey (LSE: TW), which is paying two dividends between now and 2 June.

On 7 April they go ex-dividend for 1.18p and on 2 June they go ex for 9.22p, for a total of 10.4 pence. With the shares trading at 172 pence this means a total dividend yield of 6% from the maintenance dividend (as Taylor Wimpey like to call it) and the special dividend.

Taylor Wimpey has net cash of £223m and in its recent financial results said that 2016 had started strongly, so the outlook seems bright.  They built 7.5% more homes last year than in the previous year and the average selling price was 8% higher. This resulted in a 34% increase in pre-tax profits to just shy of £604 million, which is fuelling these healthy dividend payments.

(And if you are really worried about Brexit, you could always hedge your position by having a punt on Betfair to treble your money… just kidding!)

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Mark Riding has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

Just released: our top 3 small-cap stocks to consider buying in October [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Investing Articles

How I’d use an empty Stocks and Shares ISA to aim for a £1,000 monthly passive income

Here's how using a Stocks and Shares ISA really could help those of us who plan to invest for an…

Read more »

Investing Articles

This FTSE stock is up 20% and set for its best day ever! Time to buy?

This Fool takes a look at the half-year results from Burberry (LON:BRBY) to see if the struggling FTSE stock might…

Read more »

Investing Articles

This latest FTSE 100 dip could be an unmissable opportunity to pick up cut-price stocks

The FTSE 100 has pulled back with the government’s policy choices creating some negative sentiment. But this gives us a…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

As the WH Smith share price falls 4% on annual results, is it still worth considering?

WH Smith took a hit after this morning’s results left shareholders unimpressed. With the share price down 4%, Mark Hartley…

Read more »

Investing Articles

The Aviva share price just jumped 4.5% but still yields 7.02%! Time to buy?

A positive set of results has put fresh life into the Aviva share price. Harvey Jones says it offers bags…

Read more »

Investing Articles

Can a €500m buyback kickstart the Vodafone share price?

The Vodafone share price has been a loser for investors in recent years, and the dividend has been cut. We…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Growth Shares

3 mistakes I now avoid when choosing which growth stocks to buy

Jon Smith runs through some of the lessons he's learnt the hard way over the years about what to look…

Read more »