Taylor Wimpey share price: why it’s a FTSE 100 dividend stock I’d buy and hold for a decade

Taylor Wimpey plc (LON: TW) could deliver higher income returns than the FTSE 100 (INDEXFTSE: UKX).

| 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 decline of the FTSE 100 in recent months means that a number of shares now offer sky-high dividend yields. Among them is house-builder Taylor Wimpey (LSE: TW). Its share price has fallen by 35% in the last year, and this means it now has a dividend yield of almost 12%. That’s exceptionally high and suggests the stock offers a wide margin of safety, as well as a strong income return outlook.

Of course, it’s not the only stock which could offer an impressive income return following recent stock market declines. Reporting on Friday was a dividend growth share which could be worth buying alongside Taylor Wimpey, in my opinion.

Improving outlook

The company in question is staffing business SThree (LSE: STHR). It released a trading update which showed that adjusted -re-tax profit for the full year is expected to be slightly ahead of the top end of market forecasts. It has experienced a strong end to the year, with gross profit rising by 12% in the final quarter. It has seen strong growth across its divisions, with 83% of gross profit now generated in international markets.

The company also announced that its CEO will step down in the new year, with a process to appoint a successor now underway. Although this could create a degree of uncertainty in the near term, SThree is expected to record a rise in earnings of 16% in the 2019 financial year. This suggests it has a bright future and may be able to raise dividends at a fast pace, with its current payout covered twice by profit. With a 5.5% dividend yield, the stock could have income investing potential for the long term.

Long-term growth potential

Taylor Wimpey’s 12% dividend is highly unusual for a FTSE 100 share. The company’s payout is expected to be covered 1.4 times by profit in the current year, while its recent updates have suggested it’s on track to deliver on its medium-term growth prospects. Certainly, there’s a slowdown in the South East in terms of demand for new-build properties, but a shortage of supply in a number of regions across the UK could lead to improving financial performance for the business over the long run.

The company has spent a number of years building a considerable land bank and improving its net cash position. In both regards, it seems to have a solid long-term growth outlook. While government policies such as Help-to-Buy and stamp duty relief may not last in the long run, demand for housing is likely to exceed supply for a number of years. Interest rates are expected to remain low, while employment levels are relatively high.

As such, the prospects for Taylor Wimpey may be more positive than the stock market is anticipating. Its stock price could be volatile in the near term, but in the long run it appears to have the potential to generate high total returns.

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.

Peter Stephens owns shares of Taylor Wimpey. 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.

More on Investing Articles

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Is the S&P 500 going to 10,000 by 2030? This expert thinks so

One stock market strategist sees animal spirits taking hold and driving the S&P 500 index even higher by the end…

Read more »

Investing Articles

I’m expecting my Phoenix Group shares to give me a total return of 25% in 2025!

Phoenix Group shares have had a difficult few months but that doesn't worry Harvey Jones. He loves their 10%+ yield…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

14.5bn reasons why I think the Legal & General share price is at least 11% undervalued

According to our writer, the Legal & General share price doesn’t appear to reflect the underlying profitability of the business. 

Read more »