Based on the latest data from investment platform AJ Bell, Taylor Wimpey (LSE: TW) shares are very popular with UK investors right now. Indeed, the housebuilder is currently second in its list of ‘top buys’, behind old favourite Lloyds Bank.
At first glance, the FTSE 250 member’s popularity looks incredibly odd. After all, the value of this company has fallen by almost a quarter in 2026 so far. For comparison, the index is up 5%.
This horrible run of form is nothing new either. Since May 2021, the stock has shed more than 50%.
Why are the shares in demand?
One potential explanation is that investors are sensing a striking contrarian opportunity. To paraphrase the legendary Warren Buffett, they’re being “greedy when others are fearful” and “buying quality merchandise when it’s marked down“.
The idea behind this is that those brave enough to buy now will reap the reward when the recovery comes. Of course, the snag with all this is that it may never arrive.
On an optimistic note, Taylor Wimpey still looks financially robust. Its balance sheet boasts a net cash position. The £2.8bn cap business possesses a lovely land bank too.
We also can’t ignore the dividend yield. This currently stands at 8.7%. Try to find a savings account that will pay this sort of rate! At a time when everyone is looking to make ends meet, that sort of cash distribution is hard to ignore.
Longer term, all major housebuilders — including Taylor Wimpey — stand to benefit from the demand for new homes. Regardless of who is in government, the current shortage can’t be ignored.
Risks ahead
This is not to say that holding the shares in the weeks and months ahead will be easy. With the full impact of the Iran-US conflict still to filter through, there’s a good chance that inflation will creep/march higher. This could see the Bank of England raising interest rates, just when we thought the post-Covid surge would draw a line under fast-rising prices.
Such a scenario will not be good news for the company as it faces higher building costs. It also won’t be great for the mortgage market and, subsequently, prospective buyers.
All this does go some way to explaining why the company is equally popular with short-sellers — those who believe there’s worse to come.
As much as the share price has already fallen, this stock is still not cheap either. A price-to-earnings (P/E) ratio of 12 actually makes it slightly more expensive than rivals. That valuation is also fairly average relative to the market as a whole.
The aforementioned monster dividend also can’t be guaranteed. Indeed, the near-7p per share payout forecast by analysts for 2026 doesn’t look set to be covered by expected profit. This can only continue for so long. Unless business improves, CEO Jennie Daly could be forced to make yet another cut.
My verdict
These risks aside, I’m still of the opinion that this company has the potential to reward investors handsomely if/when the housing market gets its mojo back. This being the case, I’m considering following the aforementioned investors and taking a position myself, albeit after making sure that my portfolio will still be sufficiently diversified if things get worse.
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Paul Summers has no position in any of the shares mentioned.
