The FTSE 100 is fighting back – and I’m going all in
The FTSE 100 has been all over the shop lately. Like every other market, it’s taken a hit from Donald Trump’s trade tariffs.
Although maybe it’s not wobbled quite as much as people think. I just checked how the UK’s blue-chip index performed last week and surprisingly, it climbed 4.6%, clawing back most of its recent losses.
Things are tough, but not catastrophic. Over the past 12 months, the FTSE 100 has edged up 5%, with total returns pushing closer to 9% once dividends are included.
One reason it’s held up is that the index wasn’t overpriced to begin with. The FTSE 100 is packed with top dividend-paying stocks, the kind that got left behind during the US tech frenzy.
UK shares look good value to me
With central banks likely to cut interest rates to soften the impact of tariffs, UK income stocks could become even more attractive.
FTSE 100 shares tend to offer higher yields than their US counterparts. Right now, the average sits at 3.65%, versus just 1.4% on the S&P 500.
If interest rates fall, cash and bond yields will follow. But there’s no immediate reason for dividends to drop. That could push more investors back towards shares.
Ten days ago, I added British Airways-owner International Consolidated Airlines Group to my SIPP. Before that, I topped up on trainer and athleisure firm JD Sports Fashion. And before that, I picked up more shares in life insurer Phoenix Group Holdings.
All looked decent value to me amid the current turbulence. I’m now fully invested. I don’t have a penny of my SIPP in cash.
Annoyingly, that means I can’t snap up more shares while they’re cheap. But I still expect to be rewarded when today’s uncertainty clears.
I’m backing my Taylor Wimpey shares
One stock I think could rebound nicely is housebuilder Taylor Wimpey (LSE: TW). Just a few months ago, its shares were flying as markets priced in multiple interest rate cuts for 2025, that would slash mortgage rates and revive demand for new homes.
Things haven’t panned out that way. The Bank of England has delivered just one cut so far. House price growth has slowed, with prices flat in February, according to the latest HM Land Registry data. Affordability remains a major hurdle, and with the temporary stamp duty break having ended on 31 March, buyers now face higher costs too.
The Taylor Wimpey share price has slumped almost 33% in the last six months, and nearly 14% over the year.
It looks reasonable value at 13.7 times earnings, but the real appeal is the dividend. The trailing yield now sits at a whopping 8.4%, one of the highest on the FTSE. I hold the stock, and the next payment hits my account on 9 May. I can’t wait.
Of course, today’s problems could drag on, for months, maybe even years. Taylor Wimpey’s shares might not bounce back quickly. But for now, the dividend looks safe enough, and I’ll be reinvesting every penny to build my stake, ready for the recovery. When it does, I reckon my Taylor Wimpey shares could lead the charge. No guarantees though.
The post The FTSE 100 is fighting back – and I’m going all in appeared first on The Motley Fool UK.
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More reading
- £10,000 invested in Taylor Wimpey shares 10 years ago is now worth…
- 3 FTSE 100 dividend stocks to consider buying while they’re on sale
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- With yields of 7.6%, 9% and 9.3%, here are 3 juicy passive income stocks to consider!
- At a 52-week low but Taylor Wimpey shares are forecast to rise 35% in a year and yield almost 9%!
Harvey Jones has positions in International Consolidated Airlines Group, JD Sports Fashion, Phoenix Group Plc, and Taylor Wimpey Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
