Last autumn, I was thrilled with the progress of my super-soaraway Taylor Wimpey (LSE: TW) shares. I wrote an article on the topic, headlined: The Taylor Wimpey share price is up 50% in a year but still gives me a 5.9% yield!
What’s that old saying? If you want to make God laugh, tell him your plans. Or in my version, boast about your investment wins.
The Taylor Wimpey share price has fallen a hefty 30% in the last six months, from 160p to around 111p. That’s wiped my gains and no, I didn’t see that coming. Go ahead God, laugh.
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Can this FTSE 100 stock fight back?
An investor who put £10,000 into the FTSE 100 housebuilder six months ago would have bought 6,250 shares. Today, they’d be worth £6,938. They’re down more than £3k.
However, they would also have received a dividend of 4.8p per share on 10 October. That would have lopped £300 off their losses. The next dividend of 4.66p lands on 9 May, we should hand them another £291. That’ll further help ease their pain. With luck, the shares will pick up at one point too.
I can laugh at myself because, deep down, I’m not worried. First, I only invested about 3% of my Self-Invested Personal Pension (SIPP) into Taylor Wimpey. My portfolio contains around 20 stocks for diversification purposes and, happily, the winners far outnumber the losers.
Second, I only buy shares for the long-term. Since I’ve no plan to sell, I haven’t lost any actual money yet. In fact, I might ultimately gain some. If the shares are still down when I reinvest my next dividend in May, I’ll pick up more shares than if they were flying high.
So what went wrong? One reason is that interest rates – and therefore mortgage rates – look set to stay higher for longer than markets expected last year, squeezing buyer demand. Another is that today’s sticky inflation is driving up build costs. The Budget won’t help, as National Insurance and Minimum Wage hikes will push up labour costs too.
What does the future hold?
On Wednesday (27 February) Taylor Wimpey said it completed 10,593 homes in 2024, down on the previous year’s 10,848. Average selling price fell from £370,000 to £356,000. Pre-tax profits fell 32.4% to £320.3m. It’s hardly surprising the shares are down too.
CEO Jennie Daly reported some positive moves, including improved affordability, a rising order book and a “robust” start to the spring selling season. Completions will only edge up slowly though, with a forecast ranging 10,400-10,800.
So will the Taylor Wimpey share price rebound? I’m making no predictions. Happily, others are. Some 16 analysts have set one-year share price forecasts. Together, they’ve produced a median target of just over 148p. If correct, that’s an increase of almost 33% from today.
The stock has a bumper trading yield of 8.6%. Add that and I’d be looking at a total return north of 40%. Will it happen? Only God knows. And he’s too busy laughing to tell me. But, over time, I expect to be laughing too. I hope others are too as I feel this stock is worth considering.
