Why I love the Taylor Wimpey share price and its massive 10% dividends

Can a surprise February house price rise boost confidence in 10% dividends from Taylor Wimpey plc (LON: TW)?

| 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.

Folks have been fearing a downturn in the housing sector for a while now, but first-half results from Barratt Developments in February showed no sign of it, and that reinforced my colleague Royston Wild’s confidence in the company’s dividends — currently set to yield in excess of 7%.

Good results

I think he’s right, and I think the same about Taylor Wimpey too. Taylor Wimpey’s dividends, including special payments, are expected to deliver a 10% yield this year. We won’t see that level every year, but I do expect to see the firm’s ordinary dividends providing very attractive yields for years to come.

Full-year results, also released in February, showed the same positive trend as seen at Barratt, with chief executive Pete Redfern saying: “2018 was another strong year for Taylor Wimpey with good progress against our strategic priorities.

Crucially, he added: “Despite ongoing macroeconomic and political uncertainty, we have made a very positive start to 2019 and are encouraged to see continued strong demand for our homes.

House prices

But the talk is all about house prices, so where are they going? Surprisingly, according to the Halifax, February saw a 5.9% rise in prices (after a 3% fall in January), pushing the average property price up to £236,800.

There has been some doubt cast on these latest figures, but at least we’re not looking at an obvious slump. And even if we do see some cooling, I really don’t see how that will afflict housebuilders like Taylor Wimpey. The company was making nice profits back when house prices were 10% lower than today, and will surely still be able to do the same if we see a 10% fall — land prices would fall too, and the balance would be little changed.

Taylor Wimpey ended 2018 sitting on record net cash of £644m, even after having paid out £500m in dividends — and it has already declared its intention to pay out £600m in dividends for 2019.

If our FTSE 100 housebuilders weren’t enough, down in the FTSE 250 there are some pretty big dividends on the cards from Crest Nicholson Holdings (LSE: CRST) too.

Hiccup

Crest Nicholson is going through a period of earnings fallback, with a 16% EPS dip last year expected to be followed by a further 13% this year — and that’s helped push the share price down 20% over the past 12 months.

The dividend has been held at 2017’s level and is expected to stay there for the next two years, but the share price fall has pushed the yield up beyond 9% now.

At the end of January, fellow Motley Fool writer Rupert Hargreaves liked the look of the then-10% yields, and it seems the market has followed him as the shares have since blipped up a little — including a 5% rise on the day as I write.

Back on track

Crest’s falling earnings were blamed by chief executive Patrick Bergin on “some challenges in London and with sales at higher price points where political and economic uncertainty has adversely impacted customer demand.”

But a revised focus is expected to reduce pressure on margins and get the company back on track over the next couple of years.

Crest’s pipline is looking good, its landbank is healthy, and again I don’t see any serious threat to the sustainability of the dividend.

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.

Alan Oscroft has no position in any of the shares mentioned. 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

Warren Buffett just bought these 2 stocks!

Warren Buffett just invested $700m in these stocks! What’s the strategy behind them, and should investors think about following in…

Read more »

Investing Articles

£10 a day invested in UK stocks could create a second income of £40,000 a year!

Investing even a small amount of money regularly can generate a substantial second income stream in the long run. Zaven…

Read more »

Content white businesswoman being congratulated by colleagues at her retirement party
Investing Articles

Are these the best stocks to buy and hold in a SIPP?

The UK has 30 ‘Dividend Aristocrats’ to buy and earn rising passive income in a SIPP, but are they the…

Read more »

Investing Articles

These UK shares are close to record cheap levels

These two UK shares are trading below their average earnings multiples, creating a potentially explosive buying opportunity for patient investors…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

My Stocks and Shares ISA has exploded in 2024. Here’s what I’m doing now

Zaven Boyrazian’s Stocks and Shares ISA is beating the FTSE 100 and S&P 500 in 2024. Here’s a look at…

Read more »

Investing Articles

Here’s the dividend forecast for Lloyds shares out to 2026

Predictions for dividend progress from Lloyds shares over the next few years look upbeat now. But the path might not…

Read more »

Middle-aged black male working at home desk
Investing Articles

1 of my favourite UK dividend shares this December!

Diageo's one of the best dividend growth shares in my Stocks and Shares ISA. At current prices I'm considering buying…

Read more »

Investing Articles

3 REITs I’d consider buying to target a long-term second income

I'm seeking ways to make a market-beating second income. These real estate investment trusts (REITs) could be just what I've…

Read more »