Taylor Wimpey's (LON:TW.) Dividend Will Be £0.0467

Taylor Wimpey plc (LON:TW.) has announced that it will pay a dividend of £0.0467 per share on the 14th of November. This means the annual payment is 9.6% of the current stock price, which is above the average for the industry.

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Taylor Wimpey's Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 389% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

The next 12 months could see EPS growing very rapidly. If the dividend continues along recent trends, we believe we could see the payout ratio reaching 86%, which is definitely on the higher side, but still sustainable.

See our latest analysis for Taylor Wimpey

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was £0.0156, compared to the most recent full-year payment of £0.0946. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Taylor Wimpey's EPS has fallen by approximately 28% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

We're Not Big Fans Of Taylor Wimpey's Dividend

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. We don't think that this is a great candidate to be an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Taylor Wimpey you should be aware of, and 1 of them can't be ignored. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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