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Taylor Wimpey turns up the income dial

Taylor Wimpey is generating significant cash and has declared another special dividend
February 28, 2017

Taylor Wimpey (TW.) continued to grow strongly last year, as the housing market largely shrugged off a brief period of uncertainty in the wake of the EU referendum. At 30.7 per cent, the average return on net operating assets exceeded the targeted 30 per cent set out in May last year, and was achieved before the end of the 2016-18 target period. Operating profit margins rose from 20.3 per cent to 20.8 per cent, well on the way to reaching a target of 22 per cent.

IC TIP: Buy at 177p

Total completions rose by 5 per cent to 14,112, while a change in the mix helped to boost average selling prices by 11 per cent to £255,000. Demand for new homes remains strong, and in the first seven weeks of the new year the net private sales rate per site per week has risen from 0.77 to 0.91, while around half of targeted completions for 2017 have already been forward sold.

Crucially, a record 51 per cent of completions were completed on land sourced from the strategic land bank, and land purchases continue to be made on a top-up basis. A total of 6,355 plots were bought at anticipated margins of around 26 per cent, with a return on capital employed of 31 per cent. At the end of the year, the short-term land bank stood at 76,000 plots, the equivalent of around 5.5 years of supply. In addition, Taylor Wimpey has the largest strategic land bank in the sector, currently standing at 108,000 plots without planning consent. During the year, 9,519 plots were converted from the strategic land bank to the short-term land bank.

With benign land costs and a build cost increase of around 4 per cent - mainly labour costs - and easily outweighed by higher average selling prices, Taylor Wimpey continued to throw off a lot of cash. As part of its target to return £1.3bn to shareholders in the period 2016-18, another special dividend has been promised in respect of 2017 which, together with an increase in the ordinary dividend, should amount to around 13.8p a share.

Analysts at Peel Hunt are forecasting adjusted pre-tax profit for the year to December 2017 of £810m (from £733m in 2016), giving EPS of 20.1p.

 

TAYLOR WIMPEY (TW.)
ORD PRICE:176.9pMARKET VALUE:£5.79bn
TOUCH:176.6-176.9p12-MONTH HIGH:202pLOW: 110p
DIVIDEND YIELD:1.6%PE RATIO:10
NET ASSET VALUE:89pNET CASH:£365m

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)*
20122.022047.20.62
20132.303067.50.69
20142.6946911.61.56
20153.1460315.11.67
20163.6873318.12.82
% change+17+22+20+69

Ex-div: 13 Apr

Payment: 19 May

*Excludes special dividends of 1.54p for 2013, 7.68p for 2014, 9.2p for 2015 and 2016