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My Taylor Wimpey (LSE: TW) shares have taken a beating, plunging 22% over the previous yr. But after I crunch the numbers, they nonetheless seem like they’re value contemplating to me. However are they?
A phrase of warning. I first purchased shares within the FTSE 100 housebuilder in 2023. In that comparatively quick interval, they’ve been extremely risky. At one level, I used to be sitting on a 40% paper achieve. Now I’m down 5%.
Greater rates of interest have hit purchaser confidence and made mortgages costlier, hitting demand. And that’s on high of long-term affordability points, to not point out the slowing economic system. Greater inflation’s pushed up labour and materials prices, additional squeezing margins. It’s quite a bit to tackle.
Is that this FTSE 100 inventory really a cut price?
Like a lot of its rivals, Taylor Wimpey reported a drop in property completions final yr. The board responded by providing incentives and reductions to patrons, once more shrinking margins.
But the steadiness sheet stays sturdy. Taylor Wimpey boasts a sturdy land financial institution, low debt and a disciplined strategy to managing prices.
With a price-to-earnings ratio of 11.6 instances, the inventory appears low cost in comparison with its historic common and friends. That’s a key cause why I see a possibility right here.
The UK nonetheless faces a persistent housing scarcity, supporting demand. The Financial institution of England’s anticipated to chop rates of interest two or 3 times this yr. If it does, mortgage prices may fall and patrons return, boosting gross sales volumes and profitability.
None of that is assured. Markets anticipated six rate of interest cuts final yr. We acquired simply two. Inflation stays sticky. Donald Trump’s tax cuts and commerce tariffs may maintain it that manner.
In its buying and selling replace on 16 January, Taylor Wimpey stated full-year UK completions had been in direction of the higher finish of its steering vary, with working revenue according to expectations. We’ll know extra when closing outcomes printed on 27 February.
The group ended 2025 with a stable £2bn order e-book, representing 7,312 properties. Nevertheless, the board additionally cautioned that Price range hikes to employer’s Nationwide Insurance coverage and the Minimal Wage will push up prices from April.
A superb dividend yield
I haven’t talked about the dividend but. That’s an enormous promoting level. The forecast yield for 2025 is 8.5%. The board coverage is to pay 7.5% of internet property every year, sometimes round £250m.
I don’t count on speedy development. Final February, the board lifted the dividend by a fraction of a penny, from 4.78p to 4.79p. Given the sky-high yield, it’s exhausting to complain.
Taylor Wimpey stays money generative. It’s weathered earlier downturns whereas sustaining engaging shareholder returns. But when issues get actually unhealthy, it may very well be minimize.
The 16 analysts providing one-year share worth forecasts have produced a median goal of simply over 148p. If appropriate, that’s a rise of round 27% from at the moment. Mixed with that yield, this is able to give me a complete return of 35%. Fingers crossed!
For now, Taylor Wimpey stays a well-managed enterprise with long-term development potential. Whereas dangers stay, notably round rates of interest and client sentiment, its valuation appears compelling. I gained’t purchase although as I have already got a giant stake. However I really feel the shares are value buyers contemplating.
