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Holding Taylor Wimpey (LSE: TW.) shares has been a horrible expertise lately, however at the least traders received loads of dividend earnings to compensate. At instances, the FTSE 250 housebuilder yielded as a lot as 10%, providing a cause to hold on and look ahead to it to get well.
Not any longer. The dividend has been hacked again. So is it time to chop my losses and discover a extra rewarding house for my cash?
Three years in the past, I believed Taylor Wimpey regarded compelling. It was a powerful and worthwhile builder, buying and selling on a low price-to-earnings ratio of round 5 – 6. Higher nonetheless, there was the sky-high yield. I do know we have to tread cautiously round yields of 8% or 9% or greater, however this one regarded sustainable. Or so I believed.
Stormy climate for this sector
The housebuilder was making critical cash, too. In 2023, it generated £473.8m of revenue earlier than tax. Alas, it wasn’t to proceed.
The housing market has been below siege. Increased mortgage charges hammered affordability simply because the cost-of-living disaster squeezed family budgets. First-time consumers misplaced the help of Assist to Purchase in 2023, whereas home costs stagnated and mortgage charges remained excessive.
Taylor Wimpey has additionally confronted hovering building prices, with constructing supplies changing into costlier. The hike in employer’s Nationwide Insurance coverage added to the squeeze.
Then there’s the cladding scandal. Because the Grenfell tragedy, Taylor Wimpey has put aside £544m for cladding and fire-safety remediation.
In 2025, income truly rose 13% to £3.84bn whereas adjusted working revenue edged up 1% to £421m. However that was earlier than £243.8m of remarkable prices, largely for cladding.
Finally, the board needed to bow to the inevitable. First-half outcomes (31 July) confirmed adjusted working revenue falling 19.4% to £129.7m. The interim dividend was slashed from 4.67p to only 1.2p, a 74.3% reduce. Is that this the ultimate straw?
Restoration perpetually delayed
The Taylor Wimpey share value is down 50% over 5 years and 15% over the past 12 months.
Don’t be fooled by web sites quoting a 9.4% dividend yield. That’s the trailing yield, primarily based on funds already made. Ahead earnings is way decrease at 2.95%, though forecasts counsel it might hit 4.4% in 2027.
There’s nonetheless a housing scarcity. Taylor Wimpey has an enormous land financial institution and says planning momentum is bettering. Its medium-term goal is 14,000 UK completions and an working margin of 16% to 18%. Planning reform might assist. However will the restoration arrive shortly sufficient? With mortgage charges and inflation threatening to remain greater for longer, I can’t see a wave of consumers out of the blue showing.
I’m a long-term investor who likes to provide firms time to get well. With dividends reinvested, I’m solely down round 18%, so my place could possibly be worse.
However with the shares at 2013 ranges, Taylor Wimpey seems to be like a price entice reasonably than an apparent cut price. I don’t assume it’s price contemplating immediately except somebody is feeling courageous, optimistic or unhinged. Promoting is a harder name. I’ll postpone the choice till 8 October, when the shares go ex-dividend. However I can see loads of FTSE 100 and FTSE 250 shares with higher prospects immediately, and I’m tempted to desert this one.
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Harvey Jones owns shares in Taylor Wimpey.
