I invested £4k in Taylor Wimpey shares last autumn. Here’s what I have today
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I bought Taylor Wimpey (LSE: TW) shares for my Self-Invested Personal Pension (SIPP) on three occasions last year, twice in September and once in November.
In total, I invested £4k in the FTSE 100 housebuilder, buying a total of 3,254 shares. On 21 November, I received my first dividend, an interim payment of £79.84. I immediately reinvested that to buy another 61 shares.
On Friday, Taylor Wimpey was at it again, paying me a final dividend. This pumped another £158.78 into my SIPP. I’ll automatically reinvest that too.
Top income stock
It’s all very pleasant, but hardly a surprise. I bought Taylor Wimpey primarily for the dividend income stream. Its shares have floundered over the last decade.
Brexit hit housebuilders hard, with stocks crashing 40% in expectation of a housing market meltdown that never happened. Skyrocketing interest rates dealt the sector another blow, as higher mortgage rates knocked sales activity and prices, while the soaring cost of labour and materials squeezed margins.
Yet I felt Taylor Wimpey was ripe for a recovery. It looked financially solid, was dirt cheap trading at around six times earnings, and yielded 7%, or so.
I calculated it would recover once interest rates peaked and started falling. I decided to take a chance and buy before it started to recover rather than afterwards, when I’d pay a lot more.
My shares have had a bumpy ride. Taylor Wimpey ended 2023 brightly, as markets decided we were heading for a whopping six interest rate cuts in 2024. Then it retreated as the ‘higher for longer’ mantra set in.
Income rolls in
The outlook has now changed again as markets anticipate the first interest rate cut, possibly next month. The Taylor Wimpey share price has jumped 8.65% in the last month. For the record, it’s climbed 14.69% over 12 months.
My own stake’s up 17.89%, worth £715.60 today. Throw in my £238.62 of dividends and my total return’s £954.22. My original £4k is worth almost £5k, and I’ve only barely held the stock for eight months.
Of course, I could just have easily lost £950 (or a lot more). That’s the risk with buying individual stocks. Plus my current £5k isn’t cash in the bank. The FTSE 100’s at an all-time high, and could easily fall next week, wiping out most of my gains. I get to keep those dividends though, whatever happens.
Taylor Wimpey isn’t quite as cheap today, trading at 17.1 times forecast earnings. I’m glad I bought it in the autumn, rather than waiting until today. The forward yield’s still juicy at 6.57% though.
Yet I’m optimistic about its future. The Bank of England’s talking about cutting interest rates, possibly down to 3% in 2025. That’ll be a huge lift for the housing market and, with luck, Taylor Wimpey shares.
These things are hard to forecast though, as this year has shown. It will be building fewer homes, and today’s expensive valuations could limit property price gains.
There are always risks. Since I plan to hold my shares for five, 10 years, and ideally even longer, I’m expecting my dividends and share values to compound nicely over time.
Pound coins for sale — 31 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
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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.