10.7% yield! Should investors buy Taylor Wimpey shares before they receive their dividend on 2nd April?
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Taylor Wimpey (LSE: TW) shares had an unusually good day yesterday (25 March), rising 3.24%. Investors need to be raised. I FTSE 250 The home builder, like the rest of the construction industry, has taken a hit since the start of the Iran war.
Its shares have fallen 25% in the past month. FTSE 100 competitors like Barratt Redrow again Persimmon they are attacked by the same drops. But does this also present an incredible once-in-a-decade buying opportunity for far-sighted investors?
Ten years ago, Taylor Wimpey’s share price rose above £2. Today, it trades at 89p. It’s been a brutal decade for builders as a whole. Since the Brexit vote in 2016, the sector has been at the forefront of all political and economic shocks.
The FTSE 250 is a struggling stock
Since then they have been plagued by affordability issues, high interest and loan costs, and the rising cost of labor and materials. An increase in employer’s National Insurance, as well as two inflation-adjusted wage increases, added to this pressure. The end of the help-to-buy program has reached demand.
As if that wasn’t enough, Taylor Wimpey had to set aside £435m to cover firefighting operations after the Grenfell Tower disaster. Now we have a war in the Middle East, which looks set to raise mortgage rates, just as we expected them to slide. The stock is down 25% in 12 months, and 50% in five years.
Taylor Wimpey has great appeal. It offers one of the most versatile benefits around. And as stocks rose, yields rose again. It is now down 10.7%, sequentially. Investors who want a share in the 2025 final payment of 2.95p need to buy before 2 April. This is when the shares become ex-dividend.
Unbelievable level of income
An investment of £5,000 in Taylor Wimpey at today’s price would take up 5,618 shares. That would give investors around £165 on 15 May. It is worth noting that the interim dividend, paid last November, was 4.67p higher.
Higher yields can appear to be at risk, as companies have to make more money to stay sustainable. And that will be difficult for Taylor Wimpey if house prices are now falling, sales are down and energy shocks are driving up its costs.
In fact, dividend cuts have already begun. The board reduced the total 2024 dividend per share by 1.25% to 9.46p. Then in 2025, with a strong 19.45% to 7.62p. I suspect we could see an equally large cut in 2026, given the current turmoil. Although given the top starting position, the crop is still worth having.
I started buying stocks three years ago and although I’m down about 23%, I’m almost back to the top after reinvesting those juicy gains. They make a real difference when they get to my account.
I am very rich in stocks, but I am very tempted to increase my exposure. I think Taylor Wimpey shares are still worth considering, from a long-term perspective. However investors should be prepared for a lot of volatility along the way. And another dividend cut too. There are quite a few dynamic deals out there today.
