Taylor Wimpey (LSE: TW) shares are the most important shock in my portfolio. Sadly, they’re an disagreeable shock.

I snapped them up in 2023, once they seemed grime low cost, buying and selling at simply six or seven instances earnings and yielding virtually 7%.

Fairly shortly, I used to be sitting on a 40% acquire and slapping myself on the again. Turned out I’d punched myself within the face. The share price is down 18% over the past 12 months.

Many of the harm got here within the second half of 2024, when it turned clear that rate of interest cuts weren’t arriving as shortly as hoped. The idea was that decrease charges would reduce mortgage prices and increase demand for property, whereas additionally making dividend shares like this extra enticing relative to money and bonds.

Worth inventory

Up to now, that state of affairs hasn’t performed out. Sure, the Financial institution of England has trimmed charges 4 instances since final August to 4.25%, however inflation is sticky. This stopped the Financial institution of England from slicing charges once more yesterday (19 June).

The UK property market stays sluggish. Nationwide mentioned costs rose 0.5% in Could, placing annual development at 3.5%, nevertheless it’s hardly a growth. Consumers raced to beat the tip of the stamp obligation vacation in March, however momentum has light since.

In the meantime, financial development forecasts are being reduce and there’s discuss of contemporary tax rises within the autumn. That received’t do a lot to elevate shopper confidence.

Taylor Wimpey’s newest replace on 30 April supplied some reassurance. The spring promoting season was progressing effectively and full-year steering was unchanged.

Administration expects full-year completions to hit 10,400 to 10,800 and is guiding for round £444m in earnings. Not unhealthy given the broader image. However not sufficient to fireplace up the share price.

Dividends doing heavy lifting

I’m down about 6% on my shares, however as soon as dividends are factored in, I’m barely forward. The trailing yield is at the moment 7.99%, among the many highest on the FTSE 100.

During the last decade, dividends have elevated at a compound common of practically 20% a yr, though it’s been extra of a bump than a climb recently. The overall dividend rose simply 1.9% in 2023 to 9.58p per share, and was cutl 1.25% in 2024 to 9.46p.

Nonetheless, that earnings helps cushion the volatility, particularly with my dividends being reinvested at what I hope is a comparatively low price. That’s quietly constructing my stake for at any time when the rebound comes.

There are nonetheless challenges. Housebuilding prices stay excessive, partly as a result of cussed inflation. Labour’s hike in employer Nationwide Insurance coverage contributions provides one other burden. Any additional delays to fee cuts might preserve sentiment subdued.

That mentioned, the trailing price-to-earnings ratio is modest at 14.2, whereas analysts have pencilled in a 12-month price goal of slightly below 145p. If that performs out, it will ship a 22% acquire from in the present day. When added to the dividend, it will ship a complete return near 30%. Time will inform.

Of the 17 analysts masking the inventory, 10 fee it a Robust Purchase, two say Purchase and 5 say Maintain. None say Promote. Buyers may think about shopping for whereas sentiment stays weak and the yield stays this excessive. I wouldn’t say it was the right restoration inventory, however I believe it’s fairly shut!