Within the FTSE 100 index, housebuilding firm Taylor Wimpey (LSE: TW) has been doing effectively.

Good buying and selling within the enterprise has powered a pleasant uptrend for the share price over the previous couple of years.

Nevertheless, the valuation nonetheless appears to be like modest. With the share price close to 161p, the forward-looking dividend yield is nearly at 6% for 2025.

An enhancing atmosphere?

Metropolis analysts predict a double-digit share rebound in earnings that 12 months. In the meantime, the atmosphere for housebuilding companies could also be set to enhance if a lighter planning regime beds in beneath the brand new authorities.

In late July, Taylor Wimpey’s half-year report was upbeat and spoke of a “good” working efficiency within the six months to 30 June.

Chief govt Jennie Daly stated the market backdrop within the interval was “relatively” steady. The enterprise noticed a “good” fee of gross sales with out the necessity to minimize costs a lot.

Regardless of excessive curiosity and mortgage charges, 2024 full-year completions within the UK will doubtless be on the “upper end” of earlier steerage. So which means the agency will doubtless full round 10,000 houses. The efficiency ought to ship working revenue consistent with expectations.

Daly welcomes the brand new authorities’s recognition that planning has been a “major” barrier to financial development. The administrators are trying ahead to delivering “much needed” new houses throughout the UK.

It’s attainable we’ll see a lift to the housebuilding trade. So proudly owning shares in Taylor Wimpey could show to be a good suggestion within the coming years, though constructive outcomes are by no means assured.

The ebb and movement of cyclicality

The inventory comes with dangers in addition to alternatives. Maybe the largest uncertainty is the cyclical nature of the trade.

There have been some massive, multi-year swings in earnings, money movement, borrowings, shareholder dividends and the share price within the agency’s historical past. So there’s no denying that Taylor Wimpey wants a supportive atmosphere and a half-decent economic system to thrive.

Issues look promising now, however that won’t at all times be the case. It could be simple to lose cash on the inventory if an funding is mis-timed.

Nonetheless, the corporate has a strong-looking steadiness sheet displaying internet money moderately than internet debt. That implies the agency has been placing cash away throughout occasions of fine buying and selling. However as talked about, it might want that money later simply to maintain the lights on.

Daly thinks the corporate has a “strong and agile” enterprise with a “sharp” operational focus. On high of that, it owns a high-quality landbank and is “well positioned” for development from 2025 — so long as supportive market circumstances stay.

On steadiness, and regardless of the dangers, I see the excessive dividend yield as enticing. That makes me inclined to hold out additional research now with a view to including a number of of the shares to a diversified, long-term portfolio.