The Taylor Wimpey (LSE: TW) share price has had a brilliant 12 months, rising 48.59%. And the fun just won’t stop. It’s up 9.28% in the last week. Plus, I’m benefiting from its trailing 5.9% yield.
I’m happy for several reasons. The obvious one is that I bought the FTSE 100 housebuilder’s shares three times last year – twice in September and once again in November. Taylor Wimpey shares aren’t my best performer over the last year, but they’re not far off.
The second reason I’m happy is that I researched the stock carefully before I purchased it, and decided it was a no-brainer buy. Which suggests my investment brain’s in the right place, at least sometimes.
I love this FTSE 100 stock
The shares looked good value, with a price-to-earnings ratio of just six or seven times earnings. The yield was stellar, nudging 7%. I thought my timing was right too, as I decided that interest rate cuts were just round the corner with inflation starting to slide.
I decided that when the Bank of England started cutting base rates, cheaper mortgages would revive the housing market. At the same time, high-yielding UK dividend stocks like this one would look even more attractive, as savings rates and bond yields retreated. That scenario’s taken longer to pan out than I expected
Since Taylor Wimpey also had a solid balance sheet which allowed it to survive the recent downturn, nothing could stop me.
I’m still getting my dividends
Rival FTSE 100 housebuilders have also had a decent year, but nothing like Taylor Wimpey. Shares in Barratt Redrow are up a solid 16.46%. Vistry Group‘s up 29.88%. Vistry would have done better, but for recent self-inflicted problems.
After such a strong run, I don’t expect Taylor Wimpey’s shares to rise another 50% over the next year. However, with inflation down to 1.7% and the Bank of England expected to cut base rates in November and December, the outlook is bright.
The downside is that those two rate cuts now look priced into the shares. If there’s any disappointment on the interest rate front, they could quickly give up their gains. I suspect there’s a bit of volatility to come.
Many believe the construction sector will benefit from Labour’s housebuilding plans, but I’m wary. I just can’t see how we can suddenly whip up 1.5m UK properties in the next five years. That may not be so bad for Taylor Wimpey though. Homes look set to remain in short supply, bolstering demand, sale prices and profits.
Taylor Wimpey isn’t as cheap as it was, with a trailing P/E of 16.77 times earnings. The price-to-sales ratio is 1.7, meaning investors are essentially paying £1.70p for each £1 of sales it makes.
I won’t buy more today. The stock now makes up more than 5% of my portfolio, which is about right. Instead, I’ll sit tight and reinvest every dividend that comes my way. With the shares forecast to yield 5.63% this year and 5.78% in 2025, I’m expecting a steady flow of them.
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Harvey Jones has positions in Taylor Wimpey Plc. The Motley Fool UK has recommended Barratt Redrow and Vistry Group Plc. 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.
