Taylor Wimpey (LSE: TW) shares had a rare good day yesterday (25 March), rising 3.24%. Investors needed the lift. The FTSE 250 housebuilder, like the rest of the construction sector, has taken a beating since the Iran war began.
Its shares have plunged 25% in the last month. FTSE 100 rivals such as Barratt Redrow and Persimmon have suffered similar drops. But does this also offer a stunning once-in-a-decade buying opportunity for farsighted investors?
Ten years ago, the Taylor Wimpey share price jumped above £2. Today, it trades at 89p. It’s been a brutal decade for builders across the board. Since the Brexit vote in 2016, the sector has been on the frontline of every political and economic shock.
Struggling FTSE 250 stock
They’ve since been hammered by affordability issues, higher interest and mortgage rates, and the rising price of labour and materials. The employer’s National Insurance hike, and two inflation-busting minimum wage increases, added to the squeeze. The end of the Help-to-Buy scheme hit demand.
As if that wasn’t enough, Taylor Wimpey had to set aside £435m to cover fire safety cladding work in the aftermath of the Grenfell Tower tragedy. Now we have war in the Middle East, which looks set to drive mortgage rates back up, just as we were expecting them to slide. The stock is down 25% over 12 months, and 50% over five years.
Taylor Wimpey has one huge attraction. It offers one of the most generous dividends around. And with the shares plunging, the yield has climbed again. It’s now a jaw-dropping 10.7%, on a trailing basis. Investors who want a share in the final 2025 payout of 2.95p need to buy before 2 April. That’s when the shares go ex-dividend.
Incredible rate of income
Investing £5,000 in Taylor Wimpey at today’s price would pick up 5,618 shares. That would give investors around £165 on 15 May. It’s worth noting that the interim dividend, paid last November, was bigger at 4.67p.
Ultra-high yields can prove vulnerable, as companies have to generate lots of cash to keep them sustainable. And that will be hard for Taylor Wimpey if house prices now dip, sales dwindle and the energy shock drives up its costs.
In fact, the dividend cuts have begun. The board cut the total 2024 dividend per share by 1.25% to 9.46p. Then in 2025, by a thumping 19.45% to 7.62p. I suspect we may see an equally big cut in 2026, due to current turmoil. Although given the high starting point, the yield may still be worth having.
I started buying the shares three years ago and although I’m down around 23%, I’m roughly at level pegging after reinvesting those juicy dividends. They make a real difference when they hit my account.
I’ve tipped a lot of money into the stock, but I’m sorely tempted to increase my exposure. I think Taylor Wimpey shares are still worth considering, with a long-term view. Yet investors have to brace themselves for a lot of volatility along the way. And some dividend cuts too. There are less volatile bargains out there today.
