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HomeMarketTaylor Wimpey shares yield a wonderful 6.41%, however is the dividend protected?

Taylor Wimpey shares yield a wonderful 6.41%, however is the dividend protected?

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Picture supply: Getty Photographs

In September and November final 12 months, I began filling my Self-Invested Private Pension (SIPP) with Taylor Wimpey (LSE: TW) shares. And I’m jolly glad I did.

The share value is up 34.39% during the last 12 months. The truth that it’s nonetheless down 4.69% over 5 years exhibits what a tough experience it had because it braved the pandemic, rocketing rates of interest and the cost-of-living disaster.

I purchased the shares once they had been valued at round six instances earnings. They regarded ripe for a restoration when curiosity and mortgage charges began to fall, reviving the housing market. We’re nonetheless ready, however the inventory’s risen in anticipation.

Earnings and progress

The opposite large attraction was the dividend. Once I purchased the shares they yielded round 7.5%, one of many highest on the FTSE 100. I’ve already obtained two payouts, in November and Might, and ploughed each straight again into the inventory.

Whereas a excessive yield’s nice, it isn’t every little thing. I wish to get a rising revenue too. Fortunately, Taylor Wimpey has a reasonably stable monitor document of dividend progress, though it’s not good. See what this chart says.


Chart by TradingView

In December 2016, the board paid a dividend per share of two.29p. Two years later, it hit 3.8p per share. Then the pandemic struck. Buyers didn’t obtain something in 2020 however when the dividend resumed it was at a better fee of 4.14p.

Nevertheless, progress has slowed. The final dividend was held at 4.79p per share. It isn’t laborious to see why.

In 2023, pre-tax income fell 42.8% to £473.8m. Revenues slumped 20% to £3.5bn, as excessive mortgage charges squeezed demand and costs. Inflation additionally drove up enter prices reminiscent of supplies and labour.

FTSE 100 stalwart

In 2022, Taylor Wimpey accomplished 14,154 properties. Final 12 months, that slumped to 10,848. Regardless of enhancing market situations, that may slip once more to 9,500-10,000 this 12 months. It’s not laborious to see why dividend progress has stalled.

But its board is effectively conscious that it operates in a cyclical market. Its coverage is to pay a dividend “throughout all stages of the housing cycle and additional significant surplus cash returns to be made at appropriate times”.

It has additionally set a goal of returning 7.5% of internet belongings to shareholders yearly. This may complete a minimum of £250m, paid in two equal instalments. That is underpinned by its “strong and resilient business model”, which is why I picked this housebuilder within the first place.

No inventory’s with out threat, even sector leaders. Housebuilders are buffeted by each financial storm. They crashed more durable than every other sector after Brexit. Additionally, if Labour wins the election and builds 1.5m properties as promised, that would squeeze costs.

But I believe we’re close to the underside of the cycle. I’d purchase extra Taylor Wimpey shares in the present day, however I have already got a reasonably first rate stake. I believe my dividend revenue stream seems protected. I’m already trying ahead to the subsequent payout.

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