Fri. Jul 19th, 2024

The current overall total of ordinary dividends, special dividends and share buybacks for the FTSE 100 is second only to last year’s, coming in at £137.2bn, compared to £137.6bn, AJ Bell’s latest Dividend Dashboard report revealed.

This equated to a cash yield of 6.9% for the FTSE 100 in 2023, with buybacks in 2023 currently totaling £54.7bn, close to 2022’s high of £58.2bn.

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This compared with 4.5% for two-year gilts and 4% for ten-year gilts, although Russ Mould, investment director at AJ Bell, added that seven firms currently offer a forecast dividend yield of 8% or more.

Considering the dividend yield alone, AJ Bell said the combination of the index’s £2trn market cap and aggregate ordinary dividend forecasts of £77.8bn for 2023, and £83.7bn for 2024, meant the FTSE 100 forecast dividend yield was of 3.9% for this year and 4.2% for next, a 10% reduction from estimates at the start of the year.

Mould warned the FTSE 100 continued “to paddle sideways”, as the index was “no higher than 12 months ago, or indeed six years ago”, sitting at odd with the strong growth in the US.

Dividend payouts are still concentrated in the market, with 55% (£42.8bn) of all FTSE dividend payouts set to come from just ten stocks in the blue-chip index, while the top 20 are set to deliver 74% of total dividends, or £57.3bn.

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Dividend growth remains similarly concentrated, with HSBC and Shell growing their expected dividends in 2023 by £1.4bn and £949m, respectively, far above NatWest in third place, with £270m in growth.

Meanwhile, Anglo American is set to see its dividend decline by £889m, while Glencore and Rio Tinto will see theirs drop by £610m and £400m, respectively.

Phoenix Group remains the highest-yielding stock in the FTSE 100, with a dividend yield of 11%, while Vodafone and British American Tobacco both also offer double-digit percentage yields.

“The aggregate earnings cover ratio for the FTSE 100 in 2023 is expected to come in at 2.16x according to analysts’ consensus earnings and dividend forecasts,” said Mould.

“This is admittedly down from the 2.59x on offer in 2022, and a smidgeon below the 2.18x cover ratio forecast that prevailed at the time this quarterly document was last published, and that reflects how adjusted net income forecasts have fallen faster than estimates for dividend payments.”


AJ Bell analysts are also expecting a new all-time high for aggregate FTSE 100 pre-tax profits in 2023, at £250.7bn, a 9.5% increase over last year.

“However, that forecast has slipped by nearly 10% from £275.5bn over the past 12 months, as estimates for the banks, miners and oils have been trimmed back to varying degrees,” Mould noted.

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Estimates for next year have also fallen, with profits now expected to grow 3% to £258bn, though this would still be a new record.

Profits from the oil and gas sectors are expected to continue declining, falling by about £5.6bn, while the healthcare sector is forecast to grow the most, with firms such as AstraZeneca and GlaxoSmithKline set to generate higher earnings.

“This defensive contribution could be valuable if a recession does indeed lie ahead, but for the moment company boardrooms seem more confident than their share prices, and the performance of the FTSE 100, would suggest,” said Mould.

“No fewer than 43 members of the UK’s elite stock market index sanctioned share buyback programmes in 2022, so flush were they with cash, and 38 have launched such schemes in 2023 (with five already set to run in 2024 for good measure).”

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