Taylor Wimpey was one of the few FTSE 100 gainers on Wednesday morning as the company announced it would increase its dividend despite falling revenues.
However, the increased dividend was one of the few bright spots in an otherwise downbeat half-year report.
The well-documented deterioration in the UK housing market was starting to play out in Taylor Wimpey’s results. Revenue fell 21% in the first half of 2023 as completions fell to 5,082 from 6,790 in the same period last year.
Taylor Wimpey did say completions were slightly ahead of their expectations and now forecast full-year completions between 10,000 and 10,500 – another small win for investors.
Taylor Wimpey shares were 1.88% higher at the time of writing, while the FTSE 100 dumped around 1.8%.
“Taylor Wimpey has followed recent trends and reported a 26% drop in completions and 21% fall in revenue. This comes as average sales rates have also depleted,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
“The substantial challenges and apprehension surrounding buyers with mortgage affordability are having a tangible impact on the builders, and Taylor Wimpey is no exception.
“Recent Nationwide data has shown that house prices have fallen at the fastest rate since the financial crisis, highlighting the extent of the pain. Taylor Wimpey’s pricing seems to be holding firm for now, but the scope of demand weakness will determine how long that’s the case. With the worst of the financial pain from higher interest rates yet to fully feed through to households, this will definitely be something to watch.”
The big concern for investors will be the ability to continue dividend payments if the housing market slows further. Judging by Taylor Wimpey’s cash position, their policy of paying out 7.5% of net assets has ample space to run before dividends become threatened.