Taylor Wimpey (LSE: TW.) shares took a hit after the company posted its half-year results Friday (31 July). As of 10am, they were down about 5%.

This share price action wasn’t the only disappointment for investors however. Because the housebuilder just changed its dividend policy, with payouts for investors set lower.

Weak H1 results

The H1 results illustrated the challenges that UK housebuilders are facing right now. For the period:

• Revenue was up just 1.7% year on year to $1,683m.
• Adjusted operating profit was down 19.4% to £129.7m.
• Adjusted earnings per share was down 21.9% to 2.5p.
• Net cash fell 48% to £168.6m.

The market backdrop remains uncertain following a more challenging second quarter, where affordability constraints and increased geopolitical uncertainty impacted customer sentiment and behaviour. While underlying customer demand continues to be good, conversion is taking longer and buyers remain highly price conscious.

Taylor Wimpey H1 results

A new dividend policy

Given this weak performance, the company decided to tweak its dividend policy. It will now aim to return 4% of net assets, comprising a minimum of 2% of net assets as an ordinary dividend, together with a further 2% of net assets returned either via dividends or share buybacks.

Earlier this year, it advised it would aim to return 7.5% of net assets with 5% returned as dividends and the other 2.5% either as dividends or buybacks. So this new policy’s quite a change.

The Board believes that a revised annual return of 4% of net assets strikes the right balance between continuing to provide an attractive level of shareholder return whilst giving the Group greater flexibility and resilience through the cycle.

Taylor Wimpey H1 results

It’s worth pointing out that when the company announced its new policy earlier in the year investors were unimpressed, because a large proportion of shareholder returns could come from buybacks instead of dividends. Now this new change is a further blow for investors. Because not only can a large chunk of shareholder returns come from buybacks but the overall distribution is going to be lower.

An underwhelming yield

Note that for H1, Taylor Wimpey declared a dividend of 1.2p per share (at a cost of £42m to the company) versus 4.67p last year. As for buybacks, these will amount to £42m.

In the H1 results, the company said that the board believes that a balanced approach, combining dividends and buybacks, is in shareholders’ best interests. However, I’m pretty sure that most investors in this stock would prefer 100% dividends.

Looking ahead, it’s hard to know how much income the company will pay out given its opaque policy. But one thing’s for sure – dividends are likely to be a lot lower than in the recent past.

If the company paid another 1.2p per share for the final 2026 dividend, the total for the year would be just 2.4p per share. At today’s share price, that equates to a yield of just 3%.

Better opportunities?

Given the constant changes to the dividend policy, I won’t be buying Taylor Wimpey shares any time soon. To my mind, there’s too much uncertainty.

Of course, the housebuilding theme does have potential in the long run, and we could see dividends and the share price rise in the future. Right now though, I see better opportunities in the market.

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Edward Sheldon does not hold any positions in the companies mentioned