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Taylor Wimpey (LSE: TW.) may simply be my decide of the FTSE 250 proper now, with a 9% forecast dividend.
The Financial institution of England has simply lowered rates of interest to three.75%, the bottom we’ve seen since early 2023. Governor Andrew Bailey did say that “with each minimize we make, how a lot additional we go turns into a better name“. However the route can solely be down in 2026 and past, absolutely. And all the things that helps make mortgages even somewhat cheaper must be a boon to homebuyers and housebuilders.
The Taylor Wimpey share value hasn’t had fun. It’s down 16% yr so far in 2025, and it’s misplaced a painful 36% up to now 5 years.
However we’re on this funding factor for the long run, proper? And what number of companies are more likely to have a safer long-term future than promoting into the UK’s power housing scarcity?
With Taylor Wimpey’s 12 November buying and selling replace, CEO Jennie Daly instructed us that uncertainty forward of the Finances had meant “softer market circumstances within the second half of the yr so far“. However the firm stored its full-year outlook consistent with earlier steering — in order that’s round 10,400 to 10,800 residence completions, excluding joint ventures.
Dividend hazard
A excessive dividend yield can imply traders have doubts about an organization’s means to pay it. And in Taylor Wimpey’s case, the corporate doesn’t present steering for the precise dividends it expects.
As a substitute, it has a coverage of paying out 7.5% of web property or at the least £250m yearly. That meant this yr’s interim really fell barely, to 4.67p per share from 4.8p on the similar stage a yr in the past.
We gained’t understand how a lot the second half will deliver till the outcomes are revealed. Meaning we’ll have to attend till March. And it provides additional uncertainty to the standard danger that any dividend can probably be minimize at any time.
Lengthy-term outlook
Rates of interest are falling, and that’s good. However I concern the UK housing market may nonetheless take a while to get again on its ft.
With our pockets below strain, lots of people nonetheless have greater spending priorities than in search of a brand new residence. I anticipate many will look forward to a clearer view of the place longer-term rates of interest may go.
It means the Taylor Wimpey dividend might rise or fall this yr, with the uncertainty extending additional. And I feel that might create but additional share value weak point, possibly for 2 or three extra years.
Purchase, or not?
Buyers wanting common passive earnings to stay on may flip to extra assured FTSE 250 options. However I reinvest my dividends, and short-term ups and downs don’t hassle me a lot. Buyers in the identical place may do effectively to think about Taylor Wimpey shares now.
Shopping for now would add to the Persimmon shares I already maintain, which isn’t nice for diversification. However I’m contemplating it.
