Image source: Getty Images
I rate Taylor Wimpey (LSE: TW.) as one of the FTSE 100‘s best long-term income shares. But the past 10 years have been shocking for the share price, sending it down more than 40%. It’s all been due to high interest rates and expensive mortgages putting pressure on the whole property sector, following the big pandemic hit.
But we’re looking at a fat forecast 8.6% dividend yield now. The business itself looks to be in good health. And I reckon 2026 could mark the best opportunity in a decade to consider getting back into Taylor Wimpey and other building stocks.
Dividend outlook
The company did shave a little off the interim dividend with first-half results, dropping it to 4.67p from 4.8p the previous year. And analyst forecasts don’t show earnings getting back to covering the dividend until 2027 — and then only just.
But the company’s policy is to pay out 7.5% of net assets, or at least £250m annually. So it’s not directly tied to earnings — and the balance sheet carried net cash of £327m at the halfway stage. Forecasts show dividends pretty much stable — up and down a tiny bit — over the next three years.
Taylor Wimpey also continues to stress “confidence in our capital allocation policy which prioritises balance sheet strength, investment in the business to support growth across the cycle and a reliable dividend for shareholders“. So, cyclical ups and downs, but prioritising a steady dividend. That’s how I read the company’s longer-term outlook, and it places it firmly among my picks for FTSE 100 income shares.
What to watch this week
Taylor Wimpey is due to post a trading update Thursday (15 January). We might not get any dividend news. But trends in completions and reservations, together with selling prices, should give us a clue how the sector is doing. October’s update reckoned the company was on for 10,400-10,800 UK completions, and operating profit around £424m. Improvements on those would be very welcome — fingers crossed we’re nearing a pivot point.
We might get an early hint Tuesday (13 January), when Persimmon is also set for a trading update, with a 4.3% dividend yield on the cards. That’s lower than Taylor Wimpey’s but forecast earnings should cover it comfortably enough over the next few years. So, maybe there’s a lower short-term yield but more safety from Persimmon?
November’s Q3 update from Persimmon revealed a 15% rise in forward sales. And that does hint at warming sentiment in the property market. CEO Dean Finch did, though, remind us of “the current macroeconomic environment and the short-term challenges facing our industry“.
Bottom line
I still expect economic pressures to bear on house builders for a while longer. And Taylor Wimpey’s forecast earnings failing to match the projected dividends in the next couple of years do make me a bit nervous.
But I can only see good coming from the sector in the long term. And I’m definitely considering a Taylor Wimpey buy — or maybe even a Persimmon top-up. 2026 could be the year for housebuilders.
