I want to take a closer look at two dividend shares, Bellway Homes (LSE: BWY) and Taylor Wimpey (LSE: TW.). Although dividends are never guaranteed, could one or both be ideal for boosting passive income?
Bellway
As I write, Bellway shares are trading for 2,292p. At this time last year they were trading for 1,689p. This equates to a 35% rise over a 12-month period. That’s decent considering many dividend shares have struggled lately due to market volatility.
The house building market looks a messy one to me. At the mercy of macroeconomic factors such as inflation, rising materials costs, as well as rising interest rates, there’s lots to take into account. These factors could hinder performance, payout, and sentiment. For example, rising costs could eat into profit margins.
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One of the market’s saving graces for me is the fact that demand for housing is outstripping supply by some distance. I don’t see this changing anytime soon due to a growing UK population. All I seem to hear when listening to commentary from politicians is about the housing crisis and promises to build more. This could eventually translate into earnings for the builders and payouts for the investors.
Bellway’s current dividend yield stands at 6%. Its forecast yield is 6.5% for its full-year results coming in mid-October. I’m keen to see these results and if it can pay its dividend. I do understand forecasts don’t always come to fruition. Bellway shares look decent value for money on a price-to-earnings ratio of 12.
Taylor Wimpey
As I write, Taylor Wimpey shares are trading for 116p. They’ve also experienced a decent run in the past 12 months. Up 28%, from 90p at this time last year, that looks a solid return to me.
Taylor Wimpey is facing similar headwinds to Bellway. To add to this, house buying numbers are falling due to higher interest rates making it harder to obtain a mortgage. In addition to this, fears of a housing crash could have a negative impact on Taylor Wimpey and others such as declining performance and inability to reward investors.
Conversely, Taylor Wimpey shares also look cheap on a price-to-earnings ratio of seven, and offer a dividend yield of 7.4%.
I’m buoyed by Taylor Wimpey’s investor returns policy. This is something I take a close look at when looking at any dividend shares. When other housebuilders have frozen or cut dividends, Taylor Wimpey has increased them. It has decided to approach the current difficult marketplace and economy with a strategy whereby it can still reward investors even with falling demand and higher prices for homes. This shows me responsible financial planning and a decent balance sheet.
My verdict on these dividend shares
Bellway recently announced a share buy back scheme and is forecasting its dividend to rise, so it looks to have a cash-rich balance sheet.
As for Taylor Wimpey, its dividend policy looks attractive on the surface of things. However, I do understand that things could change.
I think investors should consider Bellway and Taylor Wimpey shares for passive income. I would implore a sense of caution due to the current state of the economy, as there could be some short-term turbulence. But I’m a big advocate of long-term buying and holding, and I believe the rewards will eventually come.
