Taylor Wimpey ups dividend despite downturn

T​​aylor Wimpey (TW.) reported higher revenue and profit in its results for 2022 despite the downturn in the housing market in the latter half of the year. And the housebuilder is confident about the future, too, a final ordinary dividend of 4.78p meaning 2022 payputs are up 10 per cent year on year.

Is it right to be so bullish? On the one hand, the company’s forward order book is 25 per cent down on this point last year, which is not insignificant, but the dent in forward volumes is not as severe as its peers, such as Persimmon (PSN). It is also less dependent on Help to Buy – accounting for 12 per cent of sales, down from 19 per cent in the prior year – than Persimmon.

One reason for this is Taylor Wimpey’s higher price point. Discounting its operations in Spain, its average home last year sold for £352,000 – a fair chunk higher than average UK house prices at any point last year. Help to Buy customers do not generally buy homes at the higher end of the market.

The thinking among many agents and analysts is that the more expensive end of the housing market will fare better in a high interest rate environment because wealthier buyers are less dependent on debt, making acquisitions with a higher proportion of cash instead. The differences between the Halifax and the Nationwide index back up this theory – with the former recording mortgage applications from wealthier buyers and thereby indicating a smaller fall in house prices compared with the latter.

Still, the data on house prices at the moment is limited and the predictions on how far they will fall this year, or over the next two years, vary widely depending on who you ask. Knight Frank is predicting a 6 per cent drop this year and a further 4 per cent fall next year. Others think this year alone could see a double-digit drop.

The housebuilder says it is prepared for “up to a 20 per cent fall in house prices and 30 per cent decline in volumes”. The fact it is increasing dividends while recognising this possibility shows confidence, but that is not a guarantor of success. Hold.

Last IC view: Hold, 124p, 3 Aug 2022