Here’s how I’m aiming for £20,698 in yearly income from £20,000 in this 8.4%-yielding FTSE dividend beast
Taylor Wimpey (LSE: TW) remains one of the FTSEâs most reliable income engines, even as the housing cycle moves through a softer phase. The company continues generating solid cash flow and maintaining a balance sheet stronger than many investors assume.
With a dividend yield among the highest in any FTSE index, shareholders are effectively being paid handsomely to wait for macroeconomic conditions to improve.
The engine driving high dividends
Underpinning any firmâs dividend payments over the long term is earnings growth. A risk to these in Taylor Wimpeyâs case is any further surge in the cost of living. This may continue to deter people from moving.
Even so, the consensus forecast of analysts covering the stock is that the firmâs earnings will grow by an average 29% a year over the medium term. This looks well supported to me by its robust set of 2025 numbers, despite the challenging housing backdrop.
In the full-year trading update of 15 January, total completions rose 6% year on year to 11,229. Private average selling prices increased 5% to £374,000, helping lift revenue 12% to £3.8bn. Operating profit edged slightly higher to around £420m, driven by higher volumes, average selling prices and land sales.
The groupâs end-year £343m net cash position underlines the resilience of its cash generation even in a muted demand environment. This was supported by its landbank model, which secures several years of future building plots in advance. The system gives the business multi-year cash flow visibility and smooths earnings across the longer business cycle.
These factors, in turn, support dividends even when margins tighten and reinforces why Taylor Wimpey remains one of the FTSEâs most dependable income stocks.
How much can I make over time?
Taylor Wimpeyâs current dividend yield is 8.4%, based on its previous 9.46p payout and the current £1.13 share price. Analyst consensus is that the return will drop to 8% this year and next year before bouncing back to 8.4% again in 2028.
So my £20,000-worth of shares in the firm could make me £26,192 in dividends after 10 years and £226,399 after 30 years. This is widely seen as the end of a standard investment cycle for long-term investors. It begins with first investments around the age of 20 and ends in early retirement options around 50.
The numbers assume the current and forecast 8.4% as an average, although dividend yields change with alterations in a firmâs share price and yearly payouts. The figures also factor in the dividends being reinvested in the stock to utilise the turbocharging power of dividend compounding.
Ultimately at the end of 30 years, my £20,000 stake could have grown into a holding worth £246,399. And that would pay me a yearly income from dividends of £20,698 by then!
My investment view
Taylor Wimpeyâs combination of high yield and solid cash generation still looks compelling to me. So I intend to add to my holding in the firm very soon and think it warrants the attention of other investors too.
The post Hereâs how Iâm aiming for £20,698 in yearly income from £20,000 in this 8.4%-yielding FTSE dividend beast appeared first on The Motley Fool UK.
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Simon Watkins 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.
