Here’s why this is one of my favourite FTSE 100 stocks

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

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

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

An enhancing atmosphere?

Metropolis analysts predict a double-digit proportion 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 underneath 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 mentioned the market backdrop within the interval was “comparatively” secure. The enterprise noticed a “good” price of gross sales with out the necessity to reduce costs a lot.

Regardless of excessive curiosity and mortgage charges, 2024 full-year completions within the UK will probably be on the “higher finish” of earlier steering. So which means the agency will probably full round 10,000 properties. The efficiency ought to ship working revenue according to expectations.

Daly welcomes the brand new authorities’s recognition that planning has been a “main” barrier to financial development. The administrators are wanting ahead to delivering “a lot wanted” new properties throughout the UK.

It’s potential 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 optimistic outcomes are by no means assured.

The ebb and movement of cyclicality

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

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

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

However, the corporate has a strong-looking stability sheet exhibiting web money fairly than web 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 “robust and agile” enterprise with a “sharp” operational focus. On prime of that, it owns a high-quality landbank and is “properly positioned” for development from 2025 — so long as supportive market circumstances stay.

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