Once I purchased Taylor Wimpey (LSE: TW) shares final yr, I assumed I’d discovered my good FTSE 100 dividend earnings inventory. 

They regarded incredible worth, buying and selling at round six occasions earnings, whereas providing an outstanding dividend yield of round 6.5%. Higher nonetheless, the share price regarded able to roll, with client price inflation lastly in retreat.

I assumed peak rates of interest would increase Taylor Wimpey in a number of methods. First, and most clearly, this might reduce mortgage charges, boosting purchaser demand.

I nonetheless love my shares

Second, with inflation on the run, the group’s enter prices similar to labour and supplies would fall, widening margins.

Lastly, financial savings charges and bond yields would slide, encouraging earnings seekers to take a bit extra danger with FTSE 100 shares like Taylor Wimpey, to generate a superior yield. That will assist the share price.

The Taylor Wimpey steadiness sheet regarded surprisingly sturdy, given the harm inflicted by the pandemic and cost-of-living disaster.

Dividend prospects regarded stable too. Aside from the inevitable Covid reduce in 2020, the board had made a behavior of accelerating it barely yearly as this chart reveals.

Chart by TradingView

I’ve hardly ever purchased a inventory with this a lot confidence. I loved the expertise a lot, I purchased Taylor Wimpey shares 3 times in 2023. Only a few months in the past I used to be sitting on a 40% capital achieve from the rising share price and had reinvested just a few dividends too.

Markets are forward-looking. Rates of interest hadn’t really fallen, however all of the anticipated rewards have been nonetheless coming by means of. Then abruptly it went incorrect.

The share price has slumped by 19.67% within the final three months. It’s up simply 6.28% over 12 months. That’s nonetheless a complete return of round 13%, nevertheless it’s method lower than I had just some quick weeks in the past. Ought to I flip this short-term volatility to my benefit, by snapping up extra inventory?

Good shopping for alternative? I feel so

The principle offender is the Price range, which the Financial institution of England has warned might enhance inflation. Which means excessive rates of interest for longer. Labour’s nationwide insurance coverage hike can even drive up employees prices. Taylor Wimpey employs 5,000.

There’s additionally rising scepticism over whether or not Labour can hit its bold housebuilding targets, and whether or not builders like Taylor Wimpey are in a position to scale up and increase completions. Or in the event that they even need to.

On 7 November, the board shrugged off the Price range to take care of full-year outlook as buyer demand picked up because of falling mortgage charges and improved affordability. Its order e book jumped from £1.9bn to £2.2bn. That ought to have lifted Taylor Wimpey shares however given wider worries, it didn’t.

The inventory isn’t as low cost because it was, with a trailing price-to-earnings ratio of 13.28. It nonetheless seems fairly good worth. The trailing yield is a bumper 7.26%. That’s forecast to hit for 7.42% in 2025. Internet debt is down to £84.7m.

Rate of interest reduce hopes could have dwindled, however I nonetheless assume Taylor Wimpey shares can be an excellent purchase for me at as we speak’s decreased price. I’d fill my boots if it wasn’t already one in all my largest portfolio holdings.