I really like FTSE 100 dividend shares, however do I purchase this FTSE 250 loser? – Imperial Wire

Because the world monetary disaster of 2007/09, US tech and progress shares have produced returns that different inventory markets can solely envy. Particularly, ‘boring, old-economy’ worth shares have critically underperformed faster-growing rivals. Nonetheless, that established pattern has abruptly reversed over the previous 12 months, with the FTSE 100 surging in entrance of the S&P 500 index.

By how a lot has the Footsie crushed its American counterpart? Let’s discover out…

Fabulous FTSE

Over the previous 12 months, the FTSE 100 Complete Return Index — which incorporates money dividends — has surged by 24.3%. That’s one of many largest positive factors I can recall in practically 4 a long time of investing in shares and shares.

In the meantime, the S&P 500 is up 15.5% up to now 12 months, however this achieve is in US {dollars}. In sterling (British kilos) phrases, the index has returned a mere 4.1% — greater than 20 share factors behind our home-grown hero.

That is excellent news for my household portfolio, which is more and more weighted in the direction of low-cost UK shares and with decreased publicity to costly US shares. Proper now, our holdings embrace at the least 25 FTSE 350 shares that we purchased for his or her low valuations and/or excessive dividend yields.

Scrumptious dividends

Reviewing the record of highest-yielding FTSE 100 dividend shares, I see that my household portfolio owns 4 of the highest six shares providing hefty money returns to shareholders. All 4 occur to be monetary companies — asset managers and/or insurers — so this can be a extremely concentrated sector of our asset combine.

Therefore, maybe my spouse and I ought to department out by shopping for dividend dynamos in very totally different market sectors? One candidate that instantly springs to thoughts is FTSE 250 agency Taylor Wimpey (LSE: TW). Over one 12 months, this inventory has misplaced 10.1%, whereas it’s has dived 33.1% over 5 years (excluding dividends).

As I write, Taylor Wimpey shares stand at 108.35p, valuing this well-known housebuilder at simply over £3.8bn. This makes it one of many largest members of the mid-cap index, however too small for the blue-chip Footsie.

At current, this share presents a juicy dividend yield of 8.6% a 12 months, with the anticipated closing dividend of 4.66p going ex-dividend on 26 March for fee round 8 Could. Due to this fact, by shopping for this earnings share on or earlier than 25 March, I’d get this money payout.

Alas, there’s a catch with this market-beating money stream. Presently, Taylor Wimpey’s income will not be sufficient to cowl these ongoing payouts, so it has to dip into its money reserves (of round £350m) to fulfill this outflow. In Metropolis jargon, this dividend yield just isn’t absolutely coated and so could also be in danger sooner or later.

In fact, a lot is dependent upon the efficiency of the UK housing market in 2026 and past. Weaker house-price inflation, larger prices, and decrease margins are already a problem for Taylor Wimpey. But when rates of interest fall, then this could be a bonus for the enterprise.

Personally, I’d purchase this inventory right now, however my spouse is extra cautious. As funding legend the late Charlie Munger as soon as remarked, “The massive cash just isn’t within the shopping for or promoting, however within the ready”. Thus, I’ll have to sit down tight till 5 March, when Taylor Wimpey releases its full-year outcomes for 2025. Watch this area!