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Taylor Wimpey (LSE: TW) shares play a key role in my retirement plans. They’re one of the biggest holdings in my self-invested personal pension (SIPP), and when I first bought in a couple of years ago, I was feeling pretty pleased with myself.
The FTSE 100 housebuilder offered a fat dividend yield, the price looked cheap. For a while, I thought I’d nailed it. A great income play with growth potential thrown in. What’s not to like?
Unfortunately, the mood’s changed. The share price has slid from 135p to around 119p in the last 12 months, a drop of roughly 12%.
A tough time for the stock
It was already on a downward drift before Donald Trump started brandishing tariffs. There shares are lower than they were five years ago, and they weren’t exactly flying then.
The housebuilding sector has struggled since Brexit shook the foundations. More recently, high interest rates have made mortgages more expensive, which has hit demand with affordability already stretched.
Rising costs, from materials and labour to this month’s employer’s National Insurance and minimum wage hikes, have piled further pressure on margins and will continue to do so.
It’s frustrating, but I’m not giving up. I’m primarily in it for the income, and that continues to impress. The trailing dividend yield is an eye-catching 7.94%, with analysts forecasting a slight bump to 8.2% next year. Not explosive growth, but it’s consistent and welcome.
Waiting for the next dividend
I automatically reinvest every penny and will pick up relatively more Taylor Wimpey stock with its latest payout while the share price is low. The next dividend lands in my SIPP on 9 May. I’m looking forward to it.
The dividend is still backed by healthy cash reserves. The company ended 2024 with net cash of £565m, comfortably ahead of its own guidance. That financial strength gives me confidence.
Completions dipped from 10,848 to 10,593 and average selling prices dipped too. Yet the board reports strong interest in early 2025, and its forward order book is larger than a year ago.
Taylor Wimpey isn’t the cheapest stock on the market, trading at around 14 times earnings, but it’s not expensive either.
Promising growth outlook
The 16 analysts covering this stock have set a median 12-month share price forecast of 145.6p. If correct, that would mean a 22% increase from where the stock trades now. Throw in the near-8% yield, and the total return could hit 30% in just one year. That would turn a £10,000 stake into around £13,000. Right now, I’d be thrilled with that. We’ll see though.
Forecasts aren’t promises. Especially in volatile times like these. Many will have been made before the latest uncertainty, but the positive sentiment is striking. Out of 18 analyst ratings, 11 have Taylor Wimpey down as a Strong Buy, two as a Buy, and five suggest Hold. Not one is recommending a sell.
I won’t be selling either. I’ll keep reinvesting my dividends and keep building my position. At some point, the economic clouds should lift, and I’m hoping Taylor Wimpey shares will finally show their worth. And I’m going to give it a lot longer than a year to come good.
