Taylor Wimpey PLC (LSE:TW.) shares trade at an unjustified premium to peers, according to Deutsche Bank, which warned over the sustainability of the housebuilder’s dividend.
Analyst Chris Millington cut the bank’s price target on the housebuilder to 96p from 122p after reducing profit forecasts for the 2026-2028 financial years by about 20-30%.
The downgrade followed Taylor Wimpey’s recent trading update, which Deutsche Bank said painted a weaker picture of the UK housing market than peers, with softer pricing trends, weaker lead indicators and expectations for higher build cost inflation.
Millington said the broker now expects return on equity of 5-6% over the next three years, which would be among the weakest in the sector and about 20% below comparable large-cap housebuilders.
Despite this, Taylor Wimpey trades at about a 15% premium to peers on a price-to-net tangible assets basis, which the Deutsche man said was unjustified.
The analyst said investors were being drawn by the group’s dividend yield of about 7%, but red-flagged that shareholder distributions were forecast to amount to 150% of post-tax profits while the company also faced ongoing fire safety cash outflows, leading him to "hold concerns over [the dividend's] sustainability".
Deutsche maintained its 'hold' rating on the shares, which closed at 82.82p, but said the stock’s relatively high valuation could lead to underperformance against sector peers.