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In distinction to the FTSE 100 as a complete, Taylor Wimpey (LSE: TW) shares have been in poor kind in 2025 to this point. The inventory is down once more right now (27 February) following the newest set of full-year numbers from the Excessive-Wycombe-based enterprise.
Large drop in revenue
Income dipped simply over 3% to £3.4bn. On it’s personal, that doesn’t sound too dangerous. Nevertheless, pre-tax revenue tanked over 32% in 2024 to £320m.
Why such a fall? Effectively, considerations about affordability on account of inflation rebounding actually haven’t helped. Having dropped to the Financial institution of England’s goal of two% again in Could 2024, we’ve since returned to three%. Clearly, that is nonetheless lots higher than the 11.1% set in October 2022. Nevertheless it has pushed Governor Andrew Bailey and co to push again their forecast of returning to 2% by six months.
A consequence of that is that rate of interest cuts are seemingly be slower going ahead, hitting demand for properties constructed by the £4bn cap.
After all, not one of the above is a shock to the market and this goes some option to explaining why the shares had been buying and selling solely barely decrease this morning fairly than crashing in worth. Furthermore, there have been just a few, extra optimistic issues for buyers to digest.
Sturdy order ebook
Regardless of the large drop in revenue, CEO Jennie Daly was (understandably) eager to place a optimistic spin on issues. She mirrored that the beginning of the spring promoting season had been “strong“. An order ebook of £2.26bn — up on the £1.95bn final 12 months — was additionally highlighted.
As factor stand, Taylor Wimpey expects to satisfy market estimates on working revenue of £444m in 2025. Whether or not that occurs is one other factor fully. As an apart, it’s price noting that non permanent tax breaks (akin to for first-time consumers) will go on the finish of March and that larger taxes for companies will kick in only some days later.
Big dividend yield
Naturally, nobody really is aware of the place the share value might be subsequent week, subsequent month or subsequent 12 months. So, what do we all know?
Effectively, Taylor Wimpey inventory presently adjustments palms for just below 13 instances forecast earnings for 2025. That’s pretty common for the UK market as a complete. It’s additionally on par with different massive property gamers akin to Persimmon and Barratt Redrow. So, we’re not speaking a daft valuation right here.
One other attraction is the yield. Though dividends are by no means assured, the previous presently stands at a monster 8.4%. For perspective, the FTSE 100 as a complete yields ‘simply’ 3.5%.
The query is whether or not this revenue stream is well worth the danger concerned, particularly because the payout isn’t predicted to be lined by revenue. Ought to issues not enhance quickly, the corporate may have to start slicing its distributions.
Endurance required
If we assume that a number of negativity has already been factored in by the market, I reckon contemplating the shares right now might ship a terrific return in time.
However that final bit is vital. Whereas the continuing undersupply of high quality housing within the UK ought to imply that massive housebuilders like Taylor Wimpey get better in time (after which some), that is most likely not one to contemplate for these hoping for a fast return.
