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The share value of IAG — or Worldwide Consolidated Airways Group (LSE: IAG) appropriately referred to as — doubled final 12 months, making it the FTSE 100‘s standout performer.
Shares within the British Airways proprietor soared as world journey rebounded post-pandemic. Sadly, I don’t maintain IAG, so may solely watch from the sidelines.
On the identical time, my stake in FTSE 100 housebuilder Taylor Wimpey (LSE: TW) tumbled 25%. Rising rates of interest and a sluggish housing market had been the culprits right here. Sadly, I do personal Taylor Wimpey.
It’s not unusual for one 12 months’s winners to develop into subsequent 12 months’s losers — and vice versa. So, may their fortunes reverse in 2025?
Has the IAG share value hit a ceiling?
IAG benefitted from pent-up journey demand, with passengers eager to fly and completely satisfied to pay extra for the privilege fares. But the scars of Covid stay. Airways appear perpetually susceptible to world challenges, together with wars, local weather change, recessions and even volcanoes.
I feel IAG shares may nonetheless climb larger. They appear low-cost, with a price-to-earnings (P/E) ratio of simply 7.2. That’s lower than half the FTSE 100 common.
The board plans to modernise fleets, develop long-haul routes and improve the client expertise, all of which may increase profitability.
However these ambitions include prices and IAG already has web debt exceeding €6bn. Funds airways additionally pose stiff competitors. Do passengers actually wish to pay further for higher service?
Falling gasoline costs helped IAG final 12 months, however as we speak’s rising oil value may squeeze margins if it continues. Inflation and better rates of interest might also discourage journey. Whereas the dividend is again, I feel the actual pleasure round IAG has handed.
For some time final 12 months, my Taylor Wimpey shares had been flying. Higher nonetheless, I used to be getting a unbelievable 7% yield. Then issues went south.
Inflation and rate of interest hikes struck have nudged up mortgage charges and cooled (however not killed) the property market.
The Taylor Wimpey share value has dropped one other 10% within the final week as rising UK bond yields sign financial hassle.
Taylor Wimpey has a surprising yield
The corporate’s newest buying and selling replace mirrored these challenges, noting a drop in gross sales and protracted uncertainties. Nonetheless, I see causes for optimism.
The UK’s power housing scarcity isn’t going away. Taylor Wimpey boasts a robust land financial institution and a strong steadiness sheet. Its P/E ratio of 10.94 may not be as little as IAG’s, nevertheless it nonetheless seems to be like a cut price to me.
Even higher, the dividend yield now stands at a staggering 8.58%. So far as I can inform, the payout is safe. There’s no likelihood I’m promoting my shares.
The 16 analysts following Taylor Wimpey predict a median share value enhance of over 42% within the subsequent 12 months, which, mixed with the yield, suggests a possible whole return of round 50%. Not fairly IAG ranges however nonetheless fairly good-looking.
Personally, I feel which may take longer than a 12 months to play out, however the potential is there.
Final 12 months, I want I’d owned IAG. Immediately, I’m backing Taylor Wimpey. Whereas I await the restoration, I’m completely satisfied accumulating and reinvesting its bumper dividend.
