At 9.2%, I think the FTSE 100’s highest dividend yield demands serious attention
The FTSE 100 continues to tear steadily higher in 2025, hitting new record peaks this week. At 9,280 points, the UK blue-chip share index has risen 12.4% since 1 January.
Yet the Footsie remains a great place to pick up bargains, in my opinion. Whether based on price-to-earnings (P/E) ratio, price-to-book (P/B) multiple, or dividend yield, many quality companies continue to trade cheaply following years of underperformance.
With this in mind, I believe Taylor Wimpey (LSE: TW.) is a high-yield dividend share that demands serious attention right now. At 9.2%, its forward dividend yield soars above the FTSE 100 average of 3.3%. In fact, it’s currently the highest yielder on the blue-chip index today.
There is danger in purchasing cyclical shares like this as the UK economy struggles and inflation rises. On the dividend front, things are especially perilous given the lack of dividend cover — a predicted 9.2p per share payout is actually above expected earnings of 8.4p, leaving little to no margin for error if trading weakens further.
A FTSE recovery share
So, why should investors consider buying Taylor Wimpey for dividends, then? One reason is that the housing market recovery remains broadly intact as buyer affordability improves. Latest Office for National Statistics (ONS) data showed average UK house prices up 3.7% in the year to June.
Another reason is that the builder retains strong financial foundations, which could support further large dividends even if earnings disappoint. Its balance sheet, which had net cash of £326.6m as of June, is one of the sector’s strongest.
Finally, I expect Taylor Wimpey to remain an impressive dividend payer over the longer term. Interest rates are tipped to continue falling steadily, while competition in the mortgage market is set to intensify too, further boosting homebuyer demand.
These factors are tipped by City analysts to drive double-digit growth in annual earnings in 2026. This also means dividends are tipped to rise further over the period, pushing the dividend yield to 9.4%.
Further out, I believe profits will steadily rise as government policy kicks in to reduce red tape and supercharge new home construction. This should give the buidler the confidence to continue paying large dividends despite the threat of temporary turbulence.
All-round value
Taylor Wimpey’s share price has dropped 18.1% since the start of 2025. It’s a fall that’s supercharged its dividend yield. It also means the FTSE business looks attractively cheap across a variety of other metrics.
City analysts expect annual earnings to flatline this year. This leaves the company trading on a forward P/E ratio of 11.9 times, comfortably below the five-year average of 15.6 times.
Furthermore, the company’s P/B ratio is 0.8. Any reading below one indicates that a share trades at a discount to the value of its assets.
I own Taylor Wimpey shares in my own portfolio. And while it’s not without risk, I plan to continue holding them as a way to generate a long-term second income.
The post At 9.2%, I think the FTSE 100’s highest dividend yield demands serious attention appeared first on The Motley Fool UK.
Should you invest £1,000 in Rolls Royce right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Rolls Royce made the list?
More reading
- Here’s why I think AI makes passive income more important than ever
- This 9.5% yielding FTSE 100 dividend stock is at a 52-week low! Time to consider buying?
- It’s never too late to consider buying top FTSE 100 dividend stocks
- How much do you need in a Stocks and Shares ISA to target £37,544 of passive income a year?
- This FTSE 100 stock is forecast to beat Rolls-Royce in the coming year â and itâs only £1!
Royston Wild 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.
