ii view: dividend stock Taylor Wimpey reports improved demand
Shares in this major housebuilder have lost a quarter of their value in the past few months. But sat on net cash and with the government attempting to lower planning hurdles, we assess prospects.
21st January 2025 11:36
by Keith Bowman from interactive investor
Full year trading update to 31 December
- Build completions of 10,593 during 2024, down from 10,848 in 2023
- Average selling prices down 1.5% to £319,000
- Sales rate of 0.75 per outlet per week, up from 0.62 in 2023
- Net cash held of £565 million, down from net cash of £678 million at the end of 2023
Guidance:
- End of year order book of £1.995 billion, up from £1.772 billion a year ago
- Continues to expect full-year operating profit of £416 million, potentially down from 2023’s £470 million
Chief executive Jennie Daly said:
“Taylor Wimpey is a strong and agile business with a clear strategy focused on operational excellence. While market conditions are uncertain, and we continue to monitor the impact of mortgage costs on affordability, we enter 2025 with a strong order book and land position, underpinned by a robust balance sheet and highly experienced teams, which positions us well to deliver volume growth in 2025.”
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ii round-up:
Taylor Wimpey (LSE:TW.) was formed from the merger of George Wimpey and Taylor Woodrow back in 2007.
Today it operates across 22 UK regional divisions as well as a small Spanish housebuilding business.
For a round-up of this latest trading update announced on 16 January, please click here.
ii view:
Headquartered in High Wycombe, Buckinghamshire, Taylor Wimpey today builds homes from flats to six-bedroom houses. A constituent of the FTSE 100 index and employing around 4,700 people, it competes against rivals such as Barratt Redrow (LSE:BTRW), Berkeley Group Holdings (The) (LSE:BKG) and Bellway (LSE:BWY). Sales at its small Spanish business totalled 4% of overall revenue in 2023.
For investors, management comments flagging increased build costs for 2025 given raised staff related taxes under the government’s October Budget, cannot be ignored. Uncertainty about the economic outlook persists, with interest rate cuts and therefore lower mortgage rates far from certain. Elevated UK government borrowing may prevent it from directly assisting the homebuilding industry as it has done in the past, while the ratio of earnings per share to dividend per share (dividend cover) is just below one times, facilitating some use of net cash held.
On the upside, ongoing hopes for lower mortgage rates likely underpin an improving sales rate. Speculation that the government could ease regulation with regards to mortgage lending criteria could buoy consumer demand if enacted. The new government’s drive to reduce planning constraints saw the group’s opportunity to buy land improve in late 2024, while net cash held of £565 million underpins the balance sheet and supports opportunity for shareholder returns.
For now, and while some caution remains sensible, the cash pile, government agenda and a forecast dividend yield of around 8% will likely convince income investors to sit tight.
Positives:
- High customer service approvals
- Attractive dividend yield (not guaranteed)
Negatives:
- Uncertain economic outlook
- Subject to planning approvals
The average rating of stock market analysts:
Buy
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