Is this my last chance to buy Taylor Wimpey before the share price rockets?
The Taylor Wimpey (LSE:TW.) share price has been a huge disappointment to me, plunging 38% in the last year. That wasnât what I expected when I added it to my Self-Invested Personal Pension (SIPP) a couple of years ago.
At the time, the shares looked cheap, trading on a price-to-earnings ratio of around seven and offering a 7%-8% dividend yield. I thought I was locking in great value from one of the most reliable income stocks on the FTSE 100.
The stock jumped soon after I bought it but the fun didn’t last. Sticky inflation, higher interest rates, the hike to employer’s National Insurance and the cladding crisis combined to hit the sector hard. Taylor Wimpeyâs total cladding remediation bill has now reached £435m, including a £222m charge in the first half of 2025 for new cavity barrier and fire safety defects.
Building through the cycle
Latest results, published on 1 October, were sturdier than the share price implies. Operating profit edged up slightly, from £416m to £424m. The order book was flat at £2.12bn though.
At todayâs price of around 102p, Taylor Wimpey shares still trade at roughly half their 2015 level and the group has slipped into the FTSE 250. On the plus side, the dividend yield’s climbed to an eye-popping 9.27%, and the valuation looks undemanding with a P/E of 12.3, below the fair value figure of 15.
A high yield and low valuation â what’s not to like? Problem is, I said that two years ago, and so far I’m only up a few percentage points, with dividends reinvested.
Falling interest rates would help, but the Bank of England remains cautious with inflation still sticky. For now, investors may need to hold their nerve and wait for sentiment to turn.
Policy shifts and planning hurdles
The government wants to speed up housebuilding by reforming planning rules, which might boost activity and completions. But it has also threatened to penalise developers who sit on land banks, forcing them to meet delivery timetables and file annual progress reports. That could add cost and complexity.
Still, Taylor Wimpey remains a well-run builder, with a strong balance sheet and consistent cash generation. If housing demand recovers, it should benefit. Unfortunately, as the UK economy slows, that could take time.
FTSE 100 recovery play
I averaged down on my holding a couple of months ago and Iâm considering doing so again. At this level, I think itâs well worth buying for the income alone. The board did cut shareholder payouts by 1.25% in 2024, and another small cut’s likely. But the income should still remain super high.
Broker reports suggests we could be in for some excitement. One-year consensus forecasts suggest the shares could soar 30% in a year to just over 132p. Nothing’s guaranteed, but it echoes my view that Taylor Wimpey has brilliant recovery potential.
Investing in shares always brings uncertainty, which is why I have built a balanced portfolio of around 15 different FTSE 100 stocks, with varying levels of income and growth potential. I still believe Taylor Wimpey is worth considering today, and although I have a big stake, I plan to buy a little more. I just can’t resist that income.
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Harvey Jones has positions in 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.
