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I’m scouring the FTSE 100 for the best dividend stocks to buy. And Taylor Wimpey (LSE:TW) is one whose gigantic dividend yields have caught my eye.
For 2023, the blue-chip housebuilder is tipped pay a total dividend to 9.1p per share, down from 9.4p last year. Yet this projection still yields a brilliant 7.5%.
This is more than double the 3.5% forward average for FTSE 100 shares. And things get even better for 2024. The full-year dividend is tipped to rise to 9.9p per share. This nudges the yield to 8.1%.
Ready to buy
I already own Taylor Wimpey shares in my portfolio. But patchy industry data discouraged me from building my stake in spite of heavy share price weakness in late 2022.
But I’m thinking of pulling the trigger now and adding to my holdings. Housing market data for the most part has remained strong and a meltdown in the market looks unlikely. So I believe builders like this could experience earnings upgrades in the months ahead.
Don’t get me wrong, rising interest rates and the weak UK economy pose a threat to builders in the near term.
Completions at Taylor Wimpey dropped to 14,154 last year from 14,302 in 2021 as buyer demand slowed from the autumn. And it predicted the number could slump to between 9,000 and 10,500 homes in 2023.
But trading activity has improved across the housebuilders at the start of the year. And fresh Rightmove data this week shows that this positive momentum has continued.
Home prices rise
The online listings provider said that the average home price ticked 0.2% higher in April, to £366,247. On the one hand, this was down significantly from the normal 1.2% rise at this time of year. But in the context of strong data a year ago, and a string of interest rate rises since then, these numbers are pretty encouraging.
The average value of first-time-buyer properties* also hit a fresh high of £224,963 last month. This was driven by interest from tenants seeking to escape surging rents, a trend that’s poised to run and run.
An ultra-competitive mortgage market is also helping the housing market to stay afloat. This is helping people get onto the ladder by reducing their monthly costs. First-time buyers can also continue to get support from the government though programmes like the First Homes and mortgage guarantee schemes.
* These are classified as homes with two bedrooms or fewer.
Upgrades coming?
At the moment, City analysts are expecting Taylor Wimpey’s annual earnings to decline 48% in 2023. This is why they also predict the full-year dividend to fall.
Yet if the housing market continues on its recent trajectory, these profits and dividend projections could improve significantly. And this could pull the FTSE firm’s share price higher.
Taylor Wimpey is due to update the market on Thursday (27 April). So buying the housebuilder now in anticipation of more strong trading numbers could be a good idea.
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