I’ve suffered a world of pain at the hands of one dividend stock in my SIPP. Its name? Taylor Wimpey (LSE: TW).
I bought it three years ago, bewitched by its ultra-high yield which has touched 10% at times. I bought a string of dividend-paying blue-chips at the same time, and they’ve done jolly well. Taylor Wimpey is the exception. It’s done jolly badly. But has it finally turned a corner?
Time to buy this FTSE 250 stock?
Investing typically moves in cycles. In the downswing, even the best run company finds life tough. Taylor Wimpey isn’t the only house builder to suffer. The sector has taken a beating across the board.
The pain began in 2016, when house builder stocks plunged 40% after the Brexit vote triggered fears of a property crash. The crash didn’t come, but the shares didn’t recover.
It was the same story in the pandemic. No crash, but no share price recovery. That was followed by the Ukraine war and cost-of-living crisis, which made buyers feel poor. Profits were squeezed at the other end too, as inflation drove up the cost of labour and materials, and employer’s National Insurance hikes further squeezed margins.
The decision to scrap the government-backed Help to Buy scheme in 2023 was another massive blow, as it hit demand from young buyers. Then came the Grenfall tragedy. Taylor Wimpey had to set aside a massive £435m specifically for cladding and fire safety remediation. We can see the impact of all this on its profits.
- 2025 – £146.5m
- 2024 – £320.3m
- 2023 – £473.8m
- 2022 – £827.9m
- 2021 – £679.6m
I started the year in an optimistic mood, anticipating a string of interest rate cuts, leading to cheaper mortgages as a result. War in Iran sank that. The Taylor Wimpey share price is down 27% year-to-date and a numbing 54% over five years. At today’s price of 78p, it’s trading at 2013 levels.
Is the income worth the risk?
But isn’t it darkest before the dawn? It might just be. Following reports of a Middle East peace deal, Taylor Wimpey shares have stirred a little. They’re up 5% in the last week. They’re still cheap, with a trailing price-to-earnings ratio of 9.95. Don’t get too excited. They’ve showed signs of life before. It never lasted.
Ignore websites showing a dividend yield of 12.1%, that’s the trailing payout. Shareholder payouts were cut by 1.25% in 2024, and 19.45% last year. Hopefully, that’s as bad as it gets but we’ll see. The forward yield is still decent at 7.7%.
I won’t buy more Taylor Wimpey shares myself. I’ve pumped enough money into this stock. But I think it’s worth considering for value investors willing to take on a bit of risk. That dividend is highly tempting. Now imagine getting share price growth on top. Just don’t expect it to happen overnight.
Should you invest £5,000 in Taylor Wimpey Plc right now?
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Harvey Jones owns shares in Taylor Wimpey.
