We’ll soon be into the last full month before our current Stocks and Shares ISA limit expires, and I’m on the search for stocks to buy before April rolls round.
If it’s for an ISA, what do I want? I want a dependable business, serving people’s long-term needs. I look for solid cash generation and the ability to pay reliable dividends. And ideally, a depressed share price with room for recovery would put the icing on the cake.
Unless I’m mistaken, Taylor Wimpey (LSE: TW.) looks like it could satisfy all those needs. And what’s more, the housebuilder is set to deliver full-year results on 5 March.
Image source: Getty Images
Good value?
Let’s look at that last factor in my list, a depressed share price — because that’s were my first caution arises. Taylor Wimpey shares have slumped 29% over the past five years, so that’s promising. But after a couple of years of falling earnings, the valuation is far from rock bottom.
In fact, we’re looking at a forecast price-to-earnings (P/E) ratio up above 30 based on the current analyst consensus. It’s over twice the FTSE 100 average. And I rarely like to buy stocks at that kind of multiple.
In the company’s January trading update, CEO Jennie Daly spoke of “a robust performance during 2025 in the context of challenging market conditions“. So maybe we should see a tough set of figures on 5 March, it seems.
But even with the property market blighted by inflation and high mortgage rates, Wimpey’s overall average selling price in 2025 increased to £335,000, from £319,000 the year before. Revenue actually grew too, to £3.8bn from £3.4bn. And the company expects to report a modest rise in 2025 operating profit. That doesn’t quite sound like a disaster to me.
Further ahead
What we’re looking at here is an industry that must surely have one of the most positive long-term outlooks among the whole of the UK stock market, right? Our housing shortage is chronic, and any plans to ease it can inevitably only be long term.
And with Bank of England rates expected to fall, forecasters expect a couple of years of rising earnings from Taylor Wimpey in 2026 and 2027. If that comes off, we could see the P/E tumble to under 13 by 2027. That could make it more the kind of stock valuation I like to buy at.
What about the dividends that I like so much? With Taylor Wimpey shares down, the forward dividend yield is up at 8%. Now, it’s not guaranteed. But the company ended the year with net cash of £343m. And that’s after paying the expected interim dividend following first-half results.
On my ISA list
I fear we could still see share price weakness from Taylor Wimpey, especially with management expecting weaker operating profit margins in 2026 — due partly to building cost inflation. But it’s on my list of candidates, though it does share it with quite a few other tempting opportunities I see out there…
