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Stock Watch

Traders eye Taylor Wimpey share price as dividend resumed

Taylor Wimpey share price: a Taylor Wimpey house

Investors will be eyeing the Taylor Wimpey share price today, as the housebuilder resumed its dividend after announcing full-year results.

The policy is to pay out roughly 7.5% of net assets, which will be at least £250m per annum. The proposed final dividend will be in the region of £151m, which equates to a 4.4p per share payout. It's not a surprise the company reinstated its dividend after fellow housebuilder Redrow did just that last month.

Taylor Wimpey share price in focus as profits tumble

Full-year profit tumbled by 67.8% to £217m as completions fell by 38.9% to 9,799. The shutting down of sites in the second quarter was blamed for the poor figures, but that is balanced out by the order book of 10,685 – a record level. It appears that some of last year’s work has been pushed into 2021. Average selling prices rose from £269,000 to £288,000. Operating profit margin dropped by 8.8% to 10.8%, which is worrying. According to management, the results were in line with expectations, and trading in the second half had almost returned to normal levels.

The Taylor Wimpey share price had fallen to its lowest level since 2013 in September, but it has since rebounded. In early November, the stock price was jolted higher as the company announced that it expected to post a full-year profit at the upper end of expectations. Since then, the stock price has been largely rangebound. Should the broader bullish move continue, it could target the 180p area, and a move beyond that might bring 200p into play. A break below 145p could find support at 140p, the 200-day moving average.      

Order book healthy despite Covid-19 impact

The health crisis caused massive disruption to the construction sector as building work ground to a halt, although the sector was one of the first to go back to work, as it's relatively easy to operate in a socially-distanced fashion. As a way of encouraging activity, as well as helping younger people on to the housing ladder, UK chancellor Rishi Sunak scrapped stamp duty on property purchases worth up to £500,000. The promotion will expire at the end of this month, but there has been growing chatter that it will be extended by three months. This incentive triggered demand as housebuilders across the board reported strong order books. In the past few days, there has been speculation the UK government will announce a state-backed 95% mortgage scheme as a part of the Budget, which has boosted homebuilders.

One could argue the property market could run out of steam when the stamp duty holiday does come to an end, but overall business optimism is on the rise thanks to the UK’s relatively successful vaccine distribution scheme. If all goes according to plan, the country should be operating without restrictions in late June, which should spur economic activity. Taylor Wimpey is bullish in its outlook, announcing in November that it had agreed to acquire £826m worth of land, significantly higher than its typical acquisition rate, which sends out a strong message.   

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