9% yield and P/E of just 12! Is this the best value stock on the FTSE today?

I’ve been scouring the FTSE to seek out the perfect worth inventory I can, and was shocked to find I already maintain it.

Though, possibly not that shocked. I’ve made a behavior of shopping for high FTSE 100 and FTSE 250 corporations which have had a poor current run and appear to be bargains because of this.

One method to choose whether or not an organization provides good worth is to test its price-to-earnings ratio. If it’s under 15, I’m .

This inventory ticks that field, even when it’s not dust low-cost, with a P/E of simply over 12. There are cheaper shares in my portfolio, comparable to troubled coach retailer JD Sports activities Style, which has a P/E of round 7.7. However this firm completely smashes it on my second worth metric, the dividend yield.

Taylor Wimpey shares look good to me

The corporate in query is Taylor Wimpey (LSE: TW.), and it at the moment yields a powerful 9.1%. Over the previous decade, it’s elevated the dividend at a compound annual development charge of 17.82%, which is exceptional. Currently although, dividend development has slowed, as my desk exhibits.

In 2021, the payout greater than doubled, nevertheless it edged up simply 1.91% in 2023 and was minimize by 1.25% final yr. That’s not splendid, nevertheless it’s comprehensible. Shareholders are being handsomely rewarded already, and an even bigger enhance would threat overstretching the enterprise. The corporate goals to share roughly 7.5% of its capital worth with traders every year, however no dividend is assured.

The slowdown displays powerful buying and selling circumstances. Housebuilders have confronted rising rates of interest, greater development prices, and stretched affordability. That’s not going to alter shortly.

Constructing by means of the cycle

Taylor Wimpey’s newest outcomes, revealed on 1 October, had been stable sufficient. The board expects 10,400 to 10,800 completions this yr and an working revenue of £424m, barely up from £416.2m in 2024. Its complete order guide was flat at £2.12bn.

At as we speak’s value of 104.6p, the inventory trades at roughly half the extent it did a decade in the past. It’s fallen 33% prior to now yr, plunging into the FTSE 250 because of this.

Decrease rates of interest would assist the housing market get better. Falling rates of interest might make high-yield dividend shares look extra enticing once more in contrast with money and bonds. That stated, with the Financial institution of England nervous about inflation, rate of interest cuts might take time.

FTSE 250 inventory to observe

Consensus forecasts counsel the shares might rise an enormous 30% within the subsequent yr, which might be nice if it occurs. The forecast yield is 8.8%, which might elevate the whole return in the direction of 40%.

With a 9% yield, modest P/E of 12, and indicators that sentiment is perhaps enhancing, I believe Taylor Wimpey is price contemplating for long-term traders. If markets fall, as some reckon, it would look even higher worth.

The FTSE 100 has damaged a string of document highs these days however there’s loads of worth for traders prepared to look. I do know I’ll preserve looking for bargains. And if markets crash as some predict, then I’ll take into account filling my boots.