Deutsche Bank has cut its forecasts for Taylor Wimpey PLC (LSE:TW.) by up to a quarter and reduced its target price to 82p from 96p, warning that the housebuilder's premium rating will fade now that its dividend has been halved.
Analyst Chris Millington said the interim results laid bare the difficulties facing the UK housebuilding sector, with pricing weak and costs rising.
He lowered pre-tax profit forecasts by 14% for this year, 23% for 2027 and 25% for 2028.
That leaves the company generating a return on equity of roughly 4% across the period, a fifth of the level it achieved before the pandemic.
Millington backed the decision to cut shareholder distributions in 2027 and 2028 to around half their 2025 level, calling it the right move.
He warned it may still hurt in the near term.
With a prospective dividend yield of about 3% and a shareholder register skewed towards retail and income investors, the change could trigger selling pressure over the next few months.
The shares are trading on roughly 18 times 2027 earnings and 0.66 times price to net tangible assets.
Both measures leave Taylor Wimpey at a premium to its closest peers.
Without the yield to justify it, Deutsche Bank expects that gap to close.
The broker retained a 'hold' rating on the stock, which closed at 78p.
