Taylor Wimpey – strong foundations for the year ahead
Aarin Chiekrie, equity analyst, Hargreaves Lansdown:: “Taylor Wimpey remains on solid ground, despite a steep share price decline in the final months of 2024 as the UK Budget, sticky mortgage rates and economic fears weighed on the whole sector. Underlying performance was good, with sales rates having improved over the last year and completions coming in towards the top end of prior guidance. The order book’s also risen, now sitting at £2.0bn, giving Taylor Wimpey good revenue visibility in the near term which should help it ride out the current macroeconomic uncertainty.
The landbank is a particular strength for Taylor Wimpey, which has a significant number of plots awaiting detailed planning permission. As the new government delivers on its promise to ease planning permission, more supply is likely to come online, and Taylor Wimpey should start to see the benefit. Although don’t expect a step change on this front, it’ll likely be late 2025 before this begins to really move the dial. The balance sheet is in great shape too, one of the strongest in the sector, which provides plenty of cover for the prospective 8.4% dividend yield on offer to investors.
There are some things to be mindful of though. Volumes aren’t expected to ramp up massively in the near term, and there has been some softness in the average selling prices of its houses at a time when some of its peers are seeing modest rises. Taylor Wimpey also called out that the recent UK Budget is likely to increase build costs this year, putting some pressure on margins. With the current economic uncertainty, there’s likely to be plenty of ups and downs in the short term. But for investors looking for exposure to the sector at an attractive valuation, and a nice income stream while they wait for a recovery, Taylor Wimpey looks like a strong choice.”